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The relationship between domestic savings and investment in Zambia: an econometric analysis from 1980 to 2016.
(The University of Zambia, 2019) Ngulube, Masauso
The aim of this paper is to investigate the relationship between domestic savings and investment in Zambia. The savings-investment relationship has recently become a subject of intense discussion in as far as policy analysis and formulation is concerned in developed and developing economies alike. The study employs the ARDL bounds testing approach to cointegration and the Granger-causality test of Toda and Yamamoto to test for causality between the two variables. Using annual data captured as a percentage of GDP from 1980 to 2016, empirical findings suggest that there is no existence of a long-run relationship between investment and savings in Zambia. Furthermore, the results report a lack of causality between the two variables in the short-run. The absence of short-run causality running from savings to investment implies a high degree of short-run international capital mobility. This implies that domestic investment in Zambia is financed by foreign saving rather than domestic saving. In light of these results, some policy measures were put forward.