Determinants of Private Saving in Ethiopia
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Date
2021-08
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Addis Ababa University
Abstract
The objective of this paper was to investigate the determinants of private saving in Ethiopia using time series annual data form 1991/92-2019/20. The study applies the augmented Dickey Fuller test for stationarity and Johansson co-integration test used to determine whether there is a long run relationship between variables. Vector error correction model is applied to estimate both short and long run models related with private saving in Ethiopia.
The estimated results indicate that, Inflation (IF), Real interest rate (RIR), age dependency ratio (ADR) and private final consumption expenditure (PCE) affect private saving negatively. While Deposit interest (DR) and per capita income (PCI) are affect private saving positively in the long run. Inflation (IF),deposit interest rate (DR) and real interest (RIR) are significant determinants of private saving both in the long run and short run, whereas age dependency ratio, per capita income and private consumption expenditure are significantly affect private saving in the long run.
The findings of the study underlined ensure stable and low inflation rates which would help improve real incomes. The government should continue its effort to push for increases economic growth which will translate to increased incomes and savings
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Keywords
Private saving, Income, Economic Growth, Error Correction Model