Are Savings the Determinant of Economic Growth in the D8 Countries?

Abstract

Domestic savings play a fundamental role in the economic development of acountry as they are the main financing source of domestic investments.Shortage of savings arising out of low level of income especially inunderdeveloped countries lead to a few number of investments andinadequate level of employment, production, national revenue and savings.This vicious cycle causes the problem of savings gap for the countries whichtry to develop economically. Countries having an inadequate level of savingsappeal to foreign savings in short term and try to develop policies in order toincrease their savings in the long term. This study has been carried out in orderto analyze the impact of savings on the economic growth of developingcountries. Using the methods of panel data analysis, this study has concludedthat domestic savings have a significant and positive impact on economicgrowth in D-8 sample. This finding indicates that D8 countries should focuson policies that increase their savings rates for high and sustainable growth.