Savings-Growth Nexus in Nigeria: An Asymmetric ARDL Approach

Abstract

This study investigates the asymmetric relationship between savings and growth in Nigeria between 1970 and 2020. The study employs Asymmetric ARDL method in tracing the non-linear relationship between the variables. The study discovered using non-linear ARDL (NARDL) causality that there was a unidirectional causal relationship running from the positive component of savings to real GDP in the short-run, long-run and very long-run (strong causality). This implies that the positive component of savings is a determinant of real GDP in Nigeria. The result further showed that there was significant positive relationship between positive component of savings and real GDP in the short and long-run but the negative component of savings was not a significant determinant of real GDP both in the short-run and long-run, more importantly, the study discovered an asymmetric relationship between savings and growth for the period under studied. The study, therefore, recommended that savings must be encouraged in the country to have more investment base as a sound fiscal policy that could propel growth, because the negative effect of dis-savings on growth is more pronounced than the positive effect of savings on growth.