Annual Forum Papers

The Relationship between Savings and Growth in South Africa: An Empirical Study

  • Year: 2003
  • Author(s): Aylit Tina Romm
  • Countries and Regions: South Africa

This paper uses the Johansen VECM estimation technique to examine the directions of association between savings and growth in South Africa over the period 1946- 1992. We examine the aggregate private saving rate and its interaction with investment and growth. The paper finds that the private saving rate has a direct as well as an indirect effect on growth. The indirect effect is through the private investment rate. In turn, we find that growth has a positive effect on the private saving rate. The extent of this effect is determined by liquidity constraints. Thus we have a virtuous cycle as growth enhances saving, which in turn further enhances growth.