Savings and Economic Growth in Botswana: An Analysis Using Bounds Testing Approach to Cointegration

Amusa, Kafayat

doi:10.22610/jebs.v5i4.395

Cited by 8 publications

(8 citation statements)

References 28 publications

(37 reference statements)

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“…It has been argued that savings of households in South Africa is influenced by income, age bracket, educational attainment and employment standing. High national savings is often seen as an instrument of economic growth (Amusa and Busani, 2013;Kudaisi, 2013;Obayelu, 2012). The higher the rate of savings in a country, the greater the possibility of high investments, which consequently leads to employment, industrial growth and economic development (Ogbokor and Samahiya, 2014;Rehman et al, 2011;Zwane et al, 2016).…”

Section: Literature Reviewmentioning

confidence: 99%

“…There is a consensus that the equality of savings and investment has a positive nexus between the two economic concepts. National savings consist of both private and public components and are often assumed to be instrumental in attaining sustainable economic growth at country level (Amusa and Busani, 2013;Kudaisi, 2013;Obayelu, 2012). This is because higher savings in a country, starting from the household level, generates improved resources for investments which in turn, lead to increase in industrial growth, reduction in unemployment, stable prices and ultimately, leads to sustainable economic development (Ogbokor and Samahiya, 2014;Rehman et al, 2011;Zwane et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

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Determinants of savings among non-Ricardian households in South Africa

Vos

Obokoh

Abiola

2020

IJSE

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PurposeThis paper examines the determinants of savings among low-income households, regarded as non-Ricardian households (NRHs), in South Africa. NRHs comprise low-income households largely depending on government welfare benefits for sustenance. This research investigates socio-economic factors determining savings pattern of low-income households in South Africa.Design/methodology/approachThe research makes use of the National Income Dynamics Study (NIDS) data set wave one to five. The longitudinal survey models are analysed in determining the socio-economic characteristics of NRH in South Africa. The estimators include Pooled ordinary least square (OLS), fixed and random effects methods.FindingsThe household grant contributes positively to the level of savings, but the savings level is still considerably low: majority of the low-income households have zero or negative savings. The average size of a NRH is about twice the size of the Ricardian, despite the NRHs’ debt burden impoverishing them.Research limitations/implicationsThe self-perpetuated poverty problem makes every factor in the vicious cycle both cause and effect of another factor, warranting reverse causality and threatening the reliability of Pooled OLS estimates for the research.Practical implicationsThe growing cost of government grant hinges on the increased level of inflation while largely depending on the number of households entering the low-income threshold.Social implicationsThe study recommends that the government creates a more enabling environment for NRHs to engage in productive activities. Also they create more low-skilled jobs and encourage reduction of birth rate among low-income households; this will reduce their expenditure and increase their level of savings and will assist in pulling them out of the vicious circle of poverty. Government can boost NRHs’ savings through increase in various grants.Originality/valueThe study makes significant contribution towards addressing the unfortunate situation of household savings among low-income brackets in South Africa. The research corroborates other studies on the effectiveness of the fiscal stimulus package to boost the welfare and savings condition of NRHs in South Africa. The result explicitly confirmed the redistribution policy of the grant to the low-income household. The grant has a significant positive effect on the savings pattern of the household. An increase in it beyond the poverty threshold could indeed break the vicious circle of poverty since the effect does not only stop at expenditure but also pass through to savings, which may ultimately boost investment. Further studies should continue the investigation of grant transmission channels to investment and income.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2019-0692

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Determinants of savings among non-Ricardian households in South Africa

Vos

Obokoh

Abiola

2020

IJSE

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“…Of all the countries, Botswana has a high ratio of gross domestic savings to GDP. This is a result of prudent fiscal spending by the government rather than because of high household savings (Amusa & Busani 2013). According to a report by the Bank of Botswana (2009), the growth in savings-GDP ratio can be attributed to the effectiveness of monetary policy, which has ensured that there is a constant and significant capital inflow from private sources.…”

Section: Botswanamentioning

confidence: 99%

Can financial development influence economic growth: The sub-Saharan analysis?

Ncanywa

Mabusela

2019

J. econ. financ. sci.

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Orientation: Financial sector development in a vast majority of sub-Saharan African countries has the potential to reduce the volatility of growth.Research purpose: This article is aimed at determining the influence of financial development on economic growth in selected sub-Saharan African countries.Motivation for the study: In most of the sub-Saharan countries, financial sectors are among the world’s least developed, and the absence of deep, efficient financial markets puts major constraints on economic growth.Research approach/design and method: This article employed panel autoregressive and distributive lag model to determine the relationship between financial development and economic growth.Main findings: The results indicated that there exists a short- and a long-run relationship between financial development and economic growth in the selected countries. In the long run, bank credit to the private sector and liquid liabilities have a positive influence on economic growth, with gross domestic savings exhibiting a negative influence.Practical/managerial implications: This article makes recommendations that as financial stability, both globally and within countries, generates jobs and improves productivity, more effort should be made in ensuring an effective and sound developed financial sector system.Contribution/value-add: The financial-economic growth nexus indicate that a well-functioning financial market development can promote economic growth. However, some controversies exist as some evidence indicated that a negative or positive financial development–growth nexus exists, so there was a need to find out what is the sub-Saharan case. Furthermore, there was a need to find development regulatory and macroeconomic policies that enhance growth.

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“…Over the years, South African consumers have accumulated more debt than savings, because they normally borrow in order in order to consume which has cultivated a culture of dissaving (Mahlo, 2011).The rapid increase in household debt is further worsened by the fact that debt has become more easily available to average South Africans at interest rates that are relatively low (Chauke, 2011). Domestic savings are essential for attaining a sustained level of economic growth and play a crucial role in promoting strong and sustained economic growth if channelled towards profitable, sound and appropriate investment opportunities (Amusa & Moyo, 2013). In comparison with other emerging markets, South Africa's savings rate is considered to be relatively low (Amusa, 2014).…”

Section: Introductionmentioning

confidence: 99%

Household savings, financing and economic growth in South Africa

Mongale¹,

Mashamaite²,

Khoza³

2018

BEH

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The South African economy is characterised by low levels of household savings which play a very crucial role in stimulating sustained economic growth. At the same time consumers borrow in order to consume. The paper intends to investigate the impact of household savings and financing on economic growth in South Africa. The study is envisaged to assist monetary authorities and policy makers to mitigate this problem. An annual time series data covering the period from 1980 to 2014 is analysed by means of the Vector Error Correction Model approach. The Johansen Cointegration test results confirmed the existence of a long run relationship amongst variables under investigations. Moreover, the results suggest that financing, namely; credit extensions and leasing finance have positive relationships with the country's economic growth while household savings indicate a negative relationship with growth. That being the case, the recommendation is that since it has been established by other studies that a rapid increase in credit is not commonly perceived to be one of the leading indicators of financial instability, policymakers are advised to consider imposing stringent credit control measures so that the demand for financing can be kept under control.

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Savings and Economic Growth in Botswana: An Analysis Using Bounds Testing Approach to Cointegration

Cited by 8 publications

References 28 publications

Determinants of savings among non-Ricardian households in South Africa

Determinants of savings among non-Ricardian households in South Africa

Can financial development influence economic growth: The sub-Saharan analysis?

Household savings, financing and economic growth in South Africa

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