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What Drives Private Saving in Botswana
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This study examines the determinants of private saving in Botswana for the period covering 1994-2009. Quarterly time series data is to evaluate the magnitude and direction of the effects of key policy and non-policy variables on private saving. The varia

Research Group
 Macroeconomic Forecasting

Date
  16th September 2013

Author
 Naledi Modisaatsone

Keywords
  Private savings; Autoregressive Distributed Lag Model; Error Correction Model

statement

This study examines the determinants of private saving in Botswana for the period covering 1994-2009. Quarterly time series data is to evaluate the magnitude and direction of the effects of key policy and non-policy variables on private saving. The variables examined are inflation, real interest rates, real gross national disposable income, degree of financial depth and dependency ratio. The dependency ratio is included in order to capture the effect of demographic influence on private savings. The stated determinants of savings are articulated in the context of the life cycle hypothesis. We investigate the short and long run behavior of the variables using an ARDL-ECM. The results suggest that there is a positive relationship between household income and their savings. The dependency ratio exerts a negative impact on private savings which supports the Lifecycle Hypothesis. The results also suggest that financial sector development has induced a positive impact on private savings in Botswana. Interest rates have a positive relationship with private savings; and, lastly, inflation has a negative relationship with private savings. Financial depth and real interest rates are the core policy instruments that the government can use to encourage savings in Botswana.

Journal of economics and behavioral studies : JEBS. Vol. 5.2013, 9, p. 603-611


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