Savings, Investment and Economic Growth Nexus in Nigeria

Abstract

The economists disagree about the order of causality among savings, investment and economic growth. Moreover, the order of causality among savings, investment and economic growth has not been adequately or fully established in economic literature. As a result of these problems, we decided to establish the order of causality among gross domestic savings, gross domestic investment and economic growth in Nigeria from 1986 to 2017 using Vector Autoregression (VAR) model. The annual time series data of gross domestic savings, gross domestic investment and gross domestic product, a proxy of economic growth that are obtained from World Bank World Development Indicators are used in the estimation of the model. The results of the impulse response functions and variance decomposition reveal that the order of causality among gross domestic savings, gross domestic investment and gross domestic product in Nigeria, runs from gross domestic savings to gross domestic investment, gross domestic investment to gross domestic product and gross domestic product to gross domestic savings. There would be steady growth of output if adequate savings are mobilized for investment expenditures in Nigeria.

Keywords: Gross domestic savings, Gross domestic investment, Economic growth, Vector autoregression model, Nigeria

DOI: 10.7176/JESD/10-14-07

Publication date:July 31^st 2019