The paper uses the methodology of Toda and Yamamoto to test for causality between growth and savings in order to avoid problems and possible misleading inferences associated with the asymptotic nature of Granger causality testing in time-series studies. The relationship between gross domestic product, gross domestic savings and private savings was examined for India and Sri Lanka. We found no causality between GDP growth and private savings in India, while it appears that there is bidirectional causality between private savings and growth in Sri Lanka. We conclude that existing`evidence' on the subject should be treated with caution, given the inappropriateness of the econometric methodology adopted in most of the previous empirical studies using time-series data.

The paper uses different measures of financial sector development for a dynamic heterogeneous panel of 17 African countries to examine the impact of financial sector development on private savings. An innovative econometric methodology is also employed related to a series of cointegration tests within a panel. This is an important contribution since traditional panel data analysis adopted in previous studies suffers from serious heterogeneity bias problems. The empirical results obtained vary considerably among countries in the panel, thus highlighting the importance of using different measures of financial sector development rather than a single indicator. The evidence is rather inconclusive, although in most of the countries in the sample a positive relationship between financial sector development and private savings seems to hold. The empirical analysis also suggests that a change in government savings is offset by an opposite change in private savings in most of the countries in the panel, thus confirming the Ricardian equivalence hypothesis. Liquidity constraints do not seem to play a vital role in most of the African countries in the group, since the relevant coefficient is negative and significant in only a small group of countries.

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This study examines the causal relationship between FDI and GDP growth in a number of East African countries, focusing on the impact of financial sector development on this relationship. There are strong theoretical reasons to believe that a developed financial sector will enhance the impact of FDI on growth, but empirical evidence remains scant. This study looks first at the short term causal relationship between FDI and GDP growth, using a robust methodology that avoids issues associated with Granger causality testing. This testing indicates little evidence of a relationship. Johansen cointegration testing yields little evidence of a long run relationship when a VECM containing just FDI and GDP growth is estimated, however once variables proxying financial sector development and an interaction variable between FDI and financial sector development are included, we find that although FDI and GDP growth may not be cointegrated directly, there is a relationship running through their interaction with the financial sector, and that FDI only appears to have a positive impact on GDP growth in cases where the financial sector is more developed. This finding is in line with the findings of previous researchers, and has important policy implications.