Savings and investment in South Asia: evidence from likelihood ratio based panel cointegration

Wahid, Abu N. M. and Salahuddin, Mohammad and Noman, Abdullah M. (2010) Savings and investment in South Asia: evidence from likelihood ratio based panel cointegration. Journal of Economic Studies, 37 (6). pp. 658-666. ISSN 0144-3585

Abstract

Purpose: This paper seeks to contribute to the study of the relationship between savings and investment in a panel of five South Asian countries.
Design/methodology/approach: A number of unit root tests such as Levin, Lin, and Chu or LLC, Breitung, Im, Pesaran, and Shin or IPS, Fisher-type tests using ADF and Fisher-type tests using PP tests are conducted that confirm the non-stationarity of data. Then the paper applies maximum likelihood-based panel cointegration method to examine the relationship between savings and investment using data on investment and savings for five South Asian developing countries, namely, Bangladesh, Pakistan, India, Nepal, and Sri Lanka over the period 1973-2007 compiled from the World Development Indicator (WDI) Database 2008 CD-ROM.
Findings: The results obtained suggest that savings and investment are cointegrated, which implies that the Feldstein-Horioka (F-H) puzzle does not hold in this region. It is also found that most of these countries have maintained an international solvency condition. Originality/value: This is another contribution that would enrich the existing literature on the F-H puzzle. The paper includes data that involve the longest sample period. No other study, as of now, has employed the panel cointegration method to study the savings investment relationship in this region.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: © Emerald Group Publishing Limited. Permanent restricted access to published version due to publisher copyright policy.
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 16 Jan 2015 00:18
Last Modified: 10 Feb 2015 01:39
Uncontrolled Keywords: investments; savings; south Asia
Fields of Research : 14 Economics > 1402 Applied Economics > 140202 Economic Development and Growth
14 Economics > 1402 Applied Economics > 140210 International Economics and International Finance
14 Economics > 1402 Applied Economics > 140212 Macroeconomics (incl. Monetary and Fiscal Theory)
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9101 Macroeconomics > 910109 Savings and Investments
Identification Number or DOI: 10.1108/01443581011086684
URI: http://eprints.usq.edu.au/id/eprint/26558

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