Exploring the Causal Relationships Between Inflation, Savings, and Economic Growth in Pakistan

Authors

  • Ibrar Nayla MPhil Scholar, National College of Business Administration and Economics, Rahim Yar Khan Campus, Lahore Author
  • Ilyas Sidra Assistant Professor, School of Economics, Bahauddin Zakariya University Multan Author
  • Abbas Asad Lecturer in Economics, Department of Economics, COMSATS University Islamabad Vehari Campus Author
  • Sultan Sana Research Scholar, School of Economics, Bahauddin Zakariya University Multan Author
  • Sheikh Muhammad Ramzan Professor of Economics, School of Economics, Bahauddin Zakariya University Multan, ramzansheikh@bzu.edu.pk Author

Keywords:

Gross Domestic Saving, Consumer Price Index, GDP Growth, VAR Model, Gross Fixed Capital Formation

Abstract

This study investigates the causal relationships between inflation, economic growth, and savings in Pakistan using time series data spanning from 1971 to 2016.  The Johansen cointegration test, using the trace test, identifies a single significant cointegrating relationship. The VAR model analysis determines the optimal lag length to be 2. The findings of the Granger causality show that there is bidirectional causality between the following pairs: gross fixed capital formation and GDP growth; gross domestic saving and GDP growth; inflation and GDP growth; and saving and capital formation. While inflation cause capital formation and saving while capital formation and saving do not cause inflation.

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Published

2024-03-31

Issue

Vol. 10 No. 1 (2024)

Section

Articles