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The impact of growth rate of GDP on savings rate in the Republic of Macedonia
The impact of growth rate of GDP on savings rate in the Republic of Macedonia

Author(s): Armen Kadriu
Subject(s): Economy, Welfare services, Economic development, Socio-Economic Research
Published by: Нов български университет
Keywords: GDP growth rate; Savings rate; Granger Causality test
Summary/Abstract: Savings rate is one of the main factors that trigger the economic development. Economists agree that high savings rate is precondition for investments, and investments are the main driving forces for the economic growth. However, almost all developing and transition countries have low savings rate, and as a result have low domestic investments, which are far below the required level for stable and long term economic prosperity. The situation is similar with the Republic of Macedonia. The country faces low level of domestic accumulation and logically is trying to attract more foreign capital in order to overcome the gap between the domestic saving and the required capital for investments. The purpose of this study is to explore the effect of growth rate of GDP on the savings rate in the Republic of Macedonia. We have explored the causality between two variables for the period 1996-2016 using Granger causality test, with the help of contemporary computer software Eviews 9.5. The results from the analysis have failed to reject the null hypothesis that GDP growth rate does not granger cause the savings rate. That means that in the case of Macedonia, GDP growth does not have any impact on the savings rate in the country. These results suggest that the savingsrate is determined by other factors, which have to be explored in details, in order to promote adequate measures for stimulating the increase in the savings rate.