Dynamic Interaction Between Savings, Investment and Economic Growth in Nigeria: A Vector Autoregressive (Var) Approach

Proceedings of the International Conference for Bankers and Academics 2016, Dhaka (in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA) ISBN 978-0-9925622-4-3

15 Pages Posted: 10 Jan 2020

See all articles by Osaretin Kayode Omoregie

Osaretin Kayode Omoregie

Lagos Business School

Fredrick Ikpesu

Pan-Atlantic University - Lagos Business School

Date Written: 2016

Abstract

The study investigated the dynamic interaction between savings, investment and economic growth in Nigeria within the period 1981 to 2014, using annual time series data obtained from the World Bank Development Indicator (WDI). The study employed the impulse response function (IRF) and the variance decomposition of VAR as well as the granger causality test. The variance decomposition revealed that GDP account more for the variation in GDS while GDS account more for the variation in GDI. In addition, GDS account more for the variation in GDP. The impulse response function showed positive influences between the variables. The causality test however revealed that a uni-directional relationship running from GDP to GDS only exist, which suggest that GDP granger cause GDS. This invariably suggests that despite the positive interactions between the variables, they do not influence each other except for GDP influencing GDS. By implication the outcome of this study signal the fact that GDP significantly influence the GDS in the Nigerian economy. From the study, it was shown that GDS do not result to GDI, to resolve this, the Central Bank of Nigeria (CBN) through its policy formulation on sectoral credit allocation, should ensure that the savings with deposit money banks are properly channelled to long-term investment. The study further revealed that GDI do not result to GDP, to resolve this, government should ensures that all investment are properly channelled to the productive sector of the economy. Finally, to ensure improvement in economic growth, government must pay special attention to the dynamic interaction between GDS, and GDI by ensuring that the savings generated are properly channelled to viable project that will lead to the overall growth of Nigeria economy.

Keywords: Gross Domestic Savings, Gross Domestic Investment, Gross Domestic Product, Nigeria, VAR

JEL Classification: C01, C22, E20, E21, E22

Suggested Citation

Omoregie, Osaretin Kayode and Ikpesu, Fredrick, Dynamic Interaction Between Savings, Investment and Economic Growth in Nigeria: A Vector Autoregressive (Var) Approach (2016). Proceedings of the International Conference for Bankers and Academics 2016, Dhaka (in partnership with Bangladesh Institute of Bank Management, Dhaka & The JDA, Tennessee State University, USA) ISBN 978-0-9925622-4-3, Available at SSRN: https://ssrn.com/abstract=3506623

Osaretin Kayode Omoregie (Contact Author)

Lagos Business School ( email )

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria
105102 (Fax)

Fredrick Ikpesu

Pan-Atlantic University - Lagos Business School

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria

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