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Theoretical and Applied Economics
No. 1 / 2021 (626), Spring

The co-integration and causal relationship between saving and economic growth in India

Dr. Tariq Ahmad BHAT
Vikram University Ujjain, India
Tariq Ahmad LONE
Aligrah Muslim University Aligarh, U.P., India
Dr. Khursheed Hussain DAR
Central University of Kashmir, Ganderbal, Jammu and Kashmir

Abstract. The role of saving in promoting economic growth has received considerable attention all over the world. Saving is considered as real driving force behind the growth of an economy. The aim of this paper is to examine the casual relationship between economic growth and savings in India. To analyze this relationship time series data from 1960 to 2019 was used. To check the stationarity of data ADF and PP test were used. The Johansen co-integration test was employed to check the relationship between the variables. Finally Granger causality test was applied to see the direction of causality. The results have shown that all the variables are non stationary. The Johnson method shows that both the variables share the relationship with one another. The econometric evidence supports that savings do cause economic growth and economic growth in turn to savings. The bi-directional casual relationship was observed, which suggests that in India higher economic growth leads to higher savings and higher savings to more economic growth.

Keywords: GDP, economic growth, saving, casual relationship, integration.

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