This paper sought to identify the causal relationship between saving and investment in Ghana as these econometric indicators serve as a measure for the economic development and wellbeing of developing countries. Annual time series of Saving and Investment in Ghana spanning from 1980 to 2017 were considered. First, the Augmented Dickey-Fuller (ADF) and the Elliott-Rothenberg-Stock (ERS) tests are carried out to determine the integration order of saving and investment data series. The Johansen's trace and maximum eigenvalue tests for cointegration were performed to ascertain the level of cointegration which suggested a long-run relationship between the saving and investment in Ghana despite potential deviations in the short-run. Finally, the Granger Causality test suggested saving as having a causal relationship with investment, while the reverse indicated no relationship. The study, therefore, recommended intensifying saving, both at the national and household level as a crucial direction for consideration if Ghana intends to finance her investments rather than relying mostly on foreign aid.
Issahaku, H. (2011), “Determinants of Saving and Investment in Deprived District Capitals in Ghana -A Case Study of Nadowli in the Upper West Region of Ghana”, Continental J. Social Sciences, Vol. 4, pp. 1-12
Naik R. G. (2014), “Savings and Investment Behaviour of Investors in Goa: An Empirical Study, Unpublished PhD Thesis, Goa University, 425 pp
Amanda S. (2017), “Worth it: Your Life, Your Money, Your Terms”, Gallery Books, 288 pp
MacKinnon, J. G. (1991), “Critical Values for Cointegration Tests”, Long-Run Economic Relationships, Engle R. F. and Granger C. W. J. (eds.), London, Oxford, pp. 267-276.
Prema-Chandra, A., and Pang-Long, T. (2003). Determinants of Household Saving in Taiwan: Growth, Demography and Public Policy, Journal of Development Studies, Vol. 39, No. 6, pp. 65 – 88.
Ngula, I. B. (2012). Determinants of Deposit Mobilisation and Its Role in Economic Growth in Ghana, Research Paper, Institute of Distance Learning, Kwame Nkrumah University of Science and Technology, 66 pp.
Ojeaga, P., Ojeaga, D., and Odejimi, D. O. (2013). “The Impact of Interest Rate on Bank Deposits: Evidence from the Nigerian Banking Sector”, Research Paper, Department of Economics and Development Studies, 89 pp.
Kodom, M. (2013), “Savings Habit and Use of Savings Among Households in Ga-East Municipality”, Research Paper, Department of Development Studies – University of Ghana, 113 pp.
Amu, M. E. K., and Amu, E. K. (2012). “Saving Behaviour in Ghana: A Study of Rural Households in the Ho Municipality of the Volta Region”, Online Journal of Social Research, Vol. 1, pp. 54 – 61.
Mashamba, T., Magweva, R., and Gumbo, L. C. (2014). “Analysing the relationship between Banks’ Deposit Interest Rate and Deposit Mobilisation: Empirical Evidence from Zimbabwean Commercial Banks (1980 - 2006)”, IOSR Journal of Business and Management, Vol. 16, No. 1, pp. 64 – 75.
Doh-Nani, R. (2011), “Is Ghana’s Budget Deficit Sustainable-A cointegration Analysis”, Unpublished MSc Thesis, Kwame Nkrumah University of Science and Technology, 88 pp.
Degutis and Novickyte (2014), “The Efficient Market Hypothesis: A Critical Review of Literature and Methodology, Vilnius University, Lithuania, 723 pp.
Dickey, D. A. and Fuller, W. A. (1981), “Likelihood ratio statistics for autoregressive time series with a unit root, Econometrica: Journal of the Econometric Society, pp. 1057-1072.
Elliott, G., Rothenberg, T. J. and Stock, J. H. (1996), “Efficient Tests for an Autoregressive Unit Root”, Econometrica, Vol. 64, No. 4, pp. 813-836
Granger C. W. J. (2001), “Essays in Econometrics: Collected Papers of Cline W. J. Granger (Econometrics Society Monograph, Vol. 1, No. 1, 545 pp.
Johansen S. (1996), “Likelihood-Based Inference in Cointegrated Vector Autoregressive Models”, Oxford University Press, USA, 280 pp.
Brooks, C. (2008), “Introductory Econometrics for Finance, Cambridge University Press, Vol. 1, No. 2, 674 pp.
Owiredu, A. (2015), “Savings Patterns of Public Sector Workers: A Case of Assin Fosu Police Municipal Division”, Published BA Thesis, School of Business, Kwame Nkrumah University of Science and Technology, Ghana, 70 pp.
Tandoh, A. (2016), A Micro-Econometric Analysis of Household Savings in Ghana, College of Arts and Social Sciences, Kwame Nkrumah University of Science and Technology, Ghana, 109 pp.
Luüs, C. (2005), “Household Saving behavior and its Promotion in South Africa”, South African Institute of Financial Markets.
This work is licensed under a Creative Commons Attribution 4.0 International License.
The names and email addresses entered in this journal site will be used exclusively for the stated purposes of this journal and will not be made available for any other purpose or to any other party.
Submission of the manuscript represents that the manuscript has not been published previously and is not considered for publication elsewhere.