Dynamics of Savings-Growth Interactions in Nigeria (1980-2013)

Abstract

This study explores the relationship between savings and income growth in Nigeria over the period 1980 – 2013. Literature revealed that a relationship is expected to exist between both variables but that some sort of controversies surrounded the direction of causality between them. Using an error correction analysis, it was discovered that a relationship does exist between both variables in Nigeria. The co-integration and ECM test revealed that a long-run relationship exists between both variables and was also able to provide the dynamics of the relationship. The granger causality test revealed that causality runs from income growth to savings in Nigeria.  Implying rejection of the Solow’s hypothesis of savings leads to income growth and acceptance the Keynesian hypothesis that income growth leads to savings.

Keywords: Savings, Growth, Investment