The Effect of Saving on Economic Growth

The central theme of this thesis is the relationship between saving and economic growth and aims at providing a thorough analysis of this relationship, both theoretically and empirically. Towards this aim, I start with a general discussion of economic growth theory, with special attention to the role of saving in these models. Furthermore, I present several empirical analyses with often relatively large data sets. The empirical part of this thesis contains a Granger causality study and different panel data studies. Regarding the causality part, I find that a majority of the countries in the data set show a causal relation between gross domestic saving and real per capita economic growth, but the direction is ambiguous. Results indicate that the direction of causality might depend on a country’s income level. The panel data studies show that saving does have a positive significant effect on economic growth. I find that the gross domestic saving rate positively affects the real per capita economic growth rate. When I divide the saving rate into private and public saving, the results indicate that public saving has a positive significant effect on economic growth. I cannot find a significant effect for private saving on real per capita economic growth.