Saving-Economic Growth Nexus In Nigeria, 1970-2007: Granger Causality And Co-Integration Analyses

The controversy surrounding the direction of causality between saving and economic growth motivated this study. The author employed the Granger-causality and co-integration techniques to analyze the relationship between saving and economic growth in Nigeria during the period 1970-2007. The Johansen co-integration test indicates that the variables (economic growth and saving) are co-integrated, and that a long-run equilibrium exists between them. In addition, the granger causality test reveals that causality runs from economic growth to saving, implying that economic growth precedes and granger causes saving. Thus, we reject the Solow’s hypothesis that saving precedes economic growth, and accept the Keynesian theory that t is economic growth that leads to higher saving. The author recommends that government and policy makers should employ policies that would accelerate economic growth so as to increase saving.