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  • Savings behaviour in Fiji: an empirical assessment using the ARDL approach to cointegration

    Author(s)
    Narayan, Paresh
    Narayan, Seema
    Griffith University Author(s)
    Narayan, Paresh
    Year published
    2006
    Metadata
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    Abstract
    Purpose - This paper aims to delineate the short- and long-run relationships between savings, real interest rate, income, current account deficits (CADs) and age dependency ratio in Fiji using cointegration and error correction models over the period 1968-2000. Design/methodology/approach - The recently developed bounds testing approach to cointegration is used, which is applicable irrespective of whether the underlying variables are integrated of order one or order zero. Given the small sample size in this study, appropriate critical values were extracted from Narayan. To estimate the short- and long-run elasticities, the ...
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    Purpose - This paper aims to delineate the short- and long-run relationships between savings, real interest rate, income, current account deficits (CADs) and age dependency ratio in Fiji using cointegration and error correction models over the period 1968-2000. Design/methodology/approach - The recently developed bounds testing approach to cointegration is used, which is applicable irrespective of whether the underlying variables are integrated of order one or order zero. Given the small sample size in this study, appropriate critical values were extracted from Narayan. To estimate the short- and long-run elasticities, the autoregressive distributed-lag model is used. Findings - In the short- and long-run: a 1 per cent increase in growth rate increases savings by over 0.07 and 0.5 per cent, respectively; a 1 per cent increase in the CAD reduces savings rate by 0.01 and 0.02 per cent, respectively; and the negative coefficient on the real interest rate implies that the income effect dominates the substitution effect, while in the short-run the total effect of the real interest rate is positive, implying that the substitution effect dominates the income effect. Originality/value - This paper makes the first attempt at estimating the savings function for the Fiji Islands. Given that Fiji's capital market is poorly developed, the empirical findings here have direct policy relevance.
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    Journal Title
    International Journal of Social Economics
    Volume
    33
    Issue
    7
    Publisher URI
    http://info.emeraldinsight.com/products/journals/journals.htm?PHPSESSID=3kel030alir0jkcgrsskifu0u0&id=ijse
    DOI
    https://doi.org/10.1108/03068290610673243
    Subject
    Economic Development Policy
    Applied Economics
    Other Economics
    Publication URI
    http://hdl.handle.net/10072/27870
    Collection
    • Journal articles

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