The relationship between domestic savings and investment: The Feldstein-Horioka test using Nigerian data

This study explores the relationship between savings and investment in Nigeria during the period 1980-2011. Unlike previous studies, this study employed Autoregressive Distributed Lag (ARDL) Bounds testing approach to test for long run relationship. The short-run dynamics are also captured from error correction model (ECM).The results of the Bounds test suggest that there is a long run relationship between savings and investment. This result is consistent with a number ofearlier studies reviewed in the literature that found saving and investment to be cointegrated in thelong run. The results also support the Feldstein-Horioka (1980) hypothesis that postulates low capital mobility internationally.