THE SAVINGS-INVESTMENT RELATIONSHIP: COINTEGRATION AND CAUSALITY EVIDENCE FROM UEMOA COUNTRIES

Jacques Loesse ESSO, Yaya KEHO

Abstract


The relationship between saving and investment has been sharply debated in the empirical literature following the pioneering work of Feldstein and Horioka (1980). This paper contributes to this literature. As opposed to most previous studies, which have used panel estimation methods, we test for cointegration and causality between saving and investment in time-series settings for the UEMOA member countries by using the bounds test for cointegration proposed by Pesaran et al. (2001) and the Granger causality test of Toda and Yamamoto (1995). The results show that domestic saving plays an active role in financing investment in only three countries. For the other four countries, the domestic savings rate and investment rate are not related.


Full Text: PDF DOI: 10.5539/ijef.v2n1p174

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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