AN EMPIRICAL INVESTIGATION OF SAVING BEHAVIOUR IN PAKISTAN

The main objective of this study is to examine short-run and long-run causal relationship between national savings and its selected determinants in Pakistan for the period 1984-2014. Using Johansen cointegration and Vector Error Correction Model (VECM), the results of the study indicate that foreign remittances, economic stability and population have positive impact on savings while government stability and income inequality have negative impact on savings. The short-run estimates show that there is convergence in the national savings equation which has speed of adjustment 47 percent in one period. Using Toda- Yamamoto Causality test the study indicates that there is bidirectional causality between income inequality and foreign remittances, income inequality and population size, government stability and population size, savings and income inequality. There is unidirectional causality between the variables included in the model: savings and economic stability, savings and population, savings and government stability, population size and economic stability, government stability and foreign remittances, foreign remittances and savings except between economic stability and foreign remittances, and between economic stability and income inequality.