Savings-Growth Nexus in Malaysia

Abstract

In this study, we look into the savings-growth nexus for the case in Malaysia. We employ annual data which spanning from 1960 to 2018. We find a long-run cointegration relationship for economic growth and savings growth. Besides that, our findings show unidirectional causality running from economic growth to savings growth. Our findings are in favour of the Keynesian view that savings cannot act as a spur to economic growth, and against the capital fundamentalists view that savings provide capital to stimulate economic growth. Policy makers in Malaysia may implement policy to increase economic growth instead of to raise interest rate to encourage savings.