Savings and investment in South Asia: evidence from likelihood ratio based panel cointegration

Article

Wahid, Abu N. M., Salahuddin, Mohammad and Noman, Abdullah M.. 2010. "Savings and investment in South Asia: evidence from likelihood ratio based panel cointegration." Journal of Economic Studies. 37 (6), pp. 658-666. https://doi.org/10.1108/01443581011086684
Article Title

Savings and investment in South Asia: evidence from likelihood ratio based panel cointegration

ERA Journal ID18417
Article CategoryArticle
AuthorsWahid, Abu N. M. (Author), Salahuddin, Mohammad (Author) and Noman, Abdullah M. (Author)
Journal TitleJournal of Economic Studies
Journal Citation37 (6), pp. 658-666
Number of Pages9
Year2010
Place of PublicationBingley, United Kingdom
ISSN0144-3585
1758-7387
Digital Object Identifier (DOI)https://doi.org/10.1108/01443581011086684
Abstract

Purpose: This paper seeks to contribute to the study of the relationship between savings and investment in a panel of five South Asian countries.
Design/methodology/approach: A number of unit root tests such as Levin, Lin, and Chu or LLC, Breitung, Im, Pesaran, and Shin or IPS, Fisher-type tests using ADF and Fisher-type tests using PP tests are conducted that confirm the non-stationarity of data. Then the paper applies maximum likelihood-based panel cointegration method to examine the relationship between savings and investment using data on investment and savings for five South Asian developing countries, namely, Bangladesh, Pakistan, India, Nepal, and Sri Lanka over the period 1973-2007 compiled from the World Development Indicator (WDI) Database 2008 CD-ROM.
Findings: The results obtained suggest that savings and investment are cointegrated, which implies that the Feldstein-Horioka (F-H) puzzle does not hold in this region. It is also found that most of these countries have maintained an international solvency condition. Originality/value: This is another contribution that would enrich the existing literature on the F-H puzzle. The paper includes data that involve the longest sample period. No other study, as of now, has employed the panel cointegration method to study the savings investment relationship in this region.

Keywordsinvestments; savings; south Asia
ANZSRC Field of Research 2020440499. Development studies not elsewhere classified
380110. International economics
380112. Macroeconomics (incl. monetary and fiscal theory)
Public Notes

© Emerald Group Publishing Limited. Permanent restricted access to published version due to publisher copyright policy.

Byline AffiliationsTennessee State University, United States
Southeast University, Bangladesh
American International University, Bangladesh
Institution of OriginUniversity of Southern Queensland
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