Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 1999:18: On the Causality Between Saving and Growth: Long- and Short-Run Dynamics and Country Heterogeneity
Björn Andersson ()
Additional contact information
Björn Andersson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: The temporal interdependence between saving and output has been in focus in a number of recent empirical studies. Results from these studies have compelled some authors to question the traditional notion of a causal chain where saving leads growth through capital accumulation. This paper contributes to this literature. As opposed to the previous studies, which have mainly utilised panel-estimation methods, the tests of causal chains here are carried out in time-series settings. Saving and GDP are estimated in bivariate vector autoregressive or vector error-correction models for Sweden, UK, and USA, and tests of Granger non-causality are performed within the estimated systems. The main results show that the causal chains linking saving and output differ across countries, and also that causality associated with adjustments to long-run relations might go in different directions than causality associated with short-term disturbances.
Keywords: Saving; growth; Granger-causality; cointegration; VAR; VECM
29 pages, October 15, 1999
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1999wp18.pdf
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