THE RELATIONSHIP BETWEEN SAVING AND GROWTH IN SOUTH AFRICA: A TIME SERIES ANALYSIS |
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| Authors: | AYLIT TINA ROMM |
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| Institution: | Lecturer, School of Economics and Business Sciences, University of the Witwatersrand. Thanks are due to Professor Johannes Fedderke for his contribution and support in writing this paper. Thanks are due too, to Martin Wittenberg, Christophe Muller and two anonymous referees for their comments. |
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| Abstract: | This paper uses the Johansen VECM estimation technique to examine the directions of association between saving and growth in South Africa over the period 1946–1992. We examine the aggregate private saving rate and its interaction with investment and growth. The paper finds that the private saving rate has a direct, as well as, an indirect effect on growth. The indirect effect is through the private investment rate. In turn, we find that growth has a positive effect on the private saving rate. The extent of this effect is determined by liquidity constraints. Thus, we have a virtuous cycle, as growth enhances saving, which in turn further enhances growth. |
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