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

Narayan, Paresh Kumar and Narayan, Seema 2006, Savings behaviour in Fiji : an empirical assessment using the ARDL approach to cointegration, International journal of social economics, vol. 33, no. 7, pp. 468-480.

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Title Savings behaviour in Fiji : an empirical assessment using the ARDL approach to cointegration
Author(s) Narayan, Paresh Kumar
Narayan, Seema
Journal name International journal of social economics
Volume number 33
Issue number 7
Start page 468
End page 480
Publisher Emerald
Place of publication Bingley, England
Publication date 2006
ISSN 0306-8293
1758-6712
Keyword(s) Fiji
savings
Summary 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.
Language eng
Field of Research 140207 Financial Economics
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2006, Emerald Group Publishing Ltd
Persistent URL http://hdl.handle.net/10536/DRO/DU:30018603

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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