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

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Published Mar 31, 2024
https://doi.org/10.61506/02.00171
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Vol. 10 No. 1 (2024): Journal of Policy Research

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

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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This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite
[1]
Ibrar, N., Ilyas, S., Abbas, A., Sultan, S. and Sheikh, M.R. 2024. Exploring the Causal Relationships Between Inflation, Savings, and Economic Growth in Pakistan. Journal of Policy Research. 10, 1 (Mar. 2024), 113–119. DOI:https://doi.org/10.61506/02.00171.
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