An Empirical Test of the Relationship between Private Savings and Economic Growth: A Case Study of Kenya

Abstract

The study aims at investigating the long run and short run relationships between private savings and economic growth in Bahrain. The study covers the period (1990-2013).The study methodology is based on the econometrics analytical approach to estimate the parameters’ value and the trends of the economic relations between the study variables by using the co-integration and Granger causality techniques. Johansen co-integration test indicates that a positive long run relationship between the study variables, while Granger causality test reveals that significant bilateral causality between the private savings and the economic growth, this means that the economic growth Granger causes the private saving, and also the private savings Granger cause the economic growth. These results indicate that the economic growth could stimulate the private saving, and the private savings could accelerate the economic growth in the long run. The study recommends that government and policy makers in the kingdom of Bahrain should employ policies that would attract more private savings in order to accelerate economic growth which would lead to raise GDP per capita and Bahraini standard of living.

Keyword: Private Savings, Economic growth, Econometrics, Kingdom of Bahrain.