Revisiting Savings-Investment Correlation in Bangladesh: Does it Matter for Capital Outflows and Economic Growth?

摘要

With the increase in financial liberalization globally, the association between international capital mobility and savings-investment correlation is gaining more importance. This paper reinvestigates the savings and investment correlation in Bangladesh after liberation war by using time series data from 1976-2015 and Feldstein and Horioka (1980) hypothesis. Absence of cointegrating relationship between savings and investment directs that limited effective savings policies exist to increase domestic investment and the economic growth is not supported by the domestic investment via domestic savings in the long run. The small correlation coefficient in the short run (0.12) suggests that a bulk share of domestic savings is moving towards abroad. Both traditional granger causality testing approach and Toda and Yamamoto (1995) and Dolado and Lutkepohl (1996) granger causality testing approach suggest that there exists short run bidirectional causality between savings and investment. The small correlation coefficient in short run in a small economy like Bangladesh has been found by many empirical studies.