Impacts of National Saving On Economic Growth In Ethiopia

Abstract

It has robust investigated the impacts of national saving on economic growth in Ethiopia by using time series data from 1974 to 2013. In this study has been given attention to identify the long run and short run as well as causality direction reaction of national saving on economic growth in Ethiopia by the help of ARDL bound test approach and ECM framework to examine the variables relationship. The empirical result revealed that gross national saving rate (GNSR), government consumption expenditure (GCE), and trade openness (TO) are found statistical significant impacts on economic growth. But inflation rate approximated by consumer price index (CPI) are statistical insignificant impacts on economic growth and bi-directional granger cause between national saving and economic growth in Ethiopia. In addition to, in the short run, except consumer price index (CPI) the rest of the explanatory variables are such as gross national saving (GNS), government consumption expenditure (GCE) and trade openness (TO) found statistical significant effects on economic growth in Ethiopia. The speed of adjustment has a magnitude 0.45680 with negative sign that implied the convergence of economic growth model towards long run equilibrium. The overall finding of the study underlined the uses of raising the level of saving habit in a sustainable aspect, that of wellorganized scheme of financial institution and financial policy has been adopted and intensify react for economic growth. Therefore, the reaction way of financial policy for saving mobilization is very crucial