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

No Thumbnail Available
File version
Author(s)
Narayan, Paresh
Narayan, Seema
Griffith University Author(s)
Primary Supervisor
Other Supervisors
Editor(s)

John J. Lawler, Leslie Armour

Date
2006
Size
File type(s)
Location
License
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 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.

Journal Title

International Journal of Social Economics

Conference Title
Book Title
Edition
Volume

33

Issue

7

Thesis Type
Degree Program
School
Patent number
Funder(s)
Grant identifier(s)
Rights Statement
Rights Statement
Item Access Status
Note
Access the data
Related item(s)
Subject

Economic Development Policy

Applied Economics

Other Economics

Persistent link to this record
Citation
Collections