The saving-investment nexus; evidence from Botswana

Abstract

The relationship between investment and saving has important implications for policies designed to improve economic growth. Evidence of a positive long run relationship between investment and saving has often been interpreted as a sign of capital immobility. This is based on the expectations that saving influences investment. Policies have therefore tended to encourage saving with the expectation that it will stimulate investment and hence economic growth. This study used Botswana data for 1970-2012 to investigate the nature of this relationship within the ramework of ARDL. The results show a negative relationship between saving and investment.They also show that this effect runs in both directions.Policy suggests that saving and investment should therefore be encouraged and an investigation should be carried out to investigate this negative relationship.