Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria?
The objective of this study is to empirically investigate the long run and short run dynamic impact of interest rate and output on gross domestic savings and gross capital formation in Nigeria. Literatures, both theoretical and empirical, suggest that the rate of interest and output are the key fact...
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| Format: | Article |
| Language: | English |
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University of Oradea Publishing House
2017-09-01
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| Series: | Oradea Journal of Business and Economics |
| Subjects: | |
| Online Access: | http://ojbe.steconomiceuoradea.ro/wp-content/uploads/2017/09/OJBE_22_45-55.pdf |
| _version_ | 1818360708358733824 |
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| author | Success Abusomwan Jessy Ezebuihe |
| author_facet | Success Abusomwan Jessy Ezebuihe |
| author_sort | Success Abusomwan |
| collection | DOAJ |
| description | The objective of this study is to empirically investigate the long run and short run dynamic impact of interest rate and output on gross domestic savings and gross capital formation in Nigeria. Literatures, both theoretical and empirical, suggest that the rate of interest and output are the key factors influencing savings and investments. A review of factors influencing interest rates and output in Nigeria is necessitated by the recent economic downturns in Nigeria that has resulted in tight monetary policy which some commentators regard as inimical to growth. Employing Ordinary Least Squares, Co-integration, Error Correction Mechanism and Granger Causality econometric techniques on a data spanning 1981 to 2014 of the Nigerian economy sourced from the World Development Index, it was found that changes in output explains the long run and short run dynamic behaviour of gross domestic savings and gross capital formation which were used as proxies for savings and investment respectively. Whereas, a bi-causality was established between output and investment, causality flowed from output to savings in Nigeria. The research also found that interest rate is not a significant determinant of savings and investment in Nigeria in both long run and short run. It is therefore recommended that to enhance investment in a period of economic downturn in Nigeria, aggregate demand should be boosted to enhance output through vigorous pursuit of fiscal policy while implementing contractionary monetary policy to address inflationary pressures created by the increase in demand. Domestic savings will improve and gross capital formation will be sustained. |
| first_indexed | 2024-12-13T21:05:05Z |
| format | Article |
| id | doaj.art-aa0d80eefd214b4797d924ee84d770c4 |
| institution | Directory Open Access Journal |
| issn | 2501-3599 2501-3599 |
| language | English |
| last_indexed | 2024-12-13T21:05:05Z |
| publishDate | 2017-09-01 |
| publisher | University of Oradea Publishing House |
| record_format | Article |
| series | Oradea Journal of Business and Economics |
| spelling | doaj.art-aa0d80eefd214b4797d924ee84d770c42022-12-21T23:31:30ZengUniversity of Oradea Publishing HouseOradea Journal of Business and Economics2501-35992501-35992017-09-01224555Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria?Success Abusomwan0Jessy Ezebuihe1Department of Economics and Statistics, Faculty of Social Sciences, University of Benin, Benin City, Edo State, Nigeria Department of Economics, University of Nigeria, Nsukka, Enugu State, Nigeria The objective of this study is to empirically investigate the long run and short run dynamic impact of interest rate and output on gross domestic savings and gross capital formation in Nigeria. Literatures, both theoretical and empirical, suggest that the rate of interest and output are the key factors influencing savings and investments. A review of factors influencing interest rates and output in Nigeria is necessitated by the recent economic downturns in Nigeria that has resulted in tight monetary policy which some commentators regard as inimical to growth. Employing Ordinary Least Squares, Co-integration, Error Correction Mechanism and Granger Causality econometric techniques on a data spanning 1981 to 2014 of the Nigerian economy sourced from the World Development Index, it was found that changes in output explains the long run and short run dynamic behaviour of gross domestic savings and gross capital formation which were used as proxies for savings and investment respectively. Whereas, a bi-causality was established between output and investment, causality flowed from output to savings in Nigeria. The research also found that interest rate is not a significant determinant of savings and investment in Nigeria in both long run and short run. It is therefore recommended that to enhance investment in a period of economic downturn in Nigeria, aggregate demand should be boosted to enhance output through vigorous pursuit of fiscal policy while implementing contractionary monetary policy to address inflationary pressures created by the increase in demand. Domestic savings will improve and gross capital formation will be sustained.http://ojbe.steconomiceuoradea.ro/wp-content/uploads/2017/09/OJBE_22_45-55.pdfGross Capital FormationGross Domestic SavingsError Correction Model |
| spellingShingle | Success Abusomwan Jessy Ezebuihe Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria? Oradea Journal of Business and Economics Gross Capital Formation Gross Domestic Savings Error Correction Model |
| title | Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria? |
| title_full | Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria? |
| title_fullStr | Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria? |
| title_full_unstemmed | Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria? |
| title_short | Gross Domestic Savings and Gross Capital: what Matters to Their Formation in an Era of Economic Recession in Nigeria? |
| title_sort | gross domestic savings and gross capital what matters to their formation in an era of economic recession in nigeria |
| topic | Gross Capital Formation Gross Domestic Savings Error Correction Model |
| url | http://ojbe.steconomiceuoradea.ro/wp-content/uploads/2017/09/OJBE_22_45-55.pdf |
| work_keys_str_mv | AT successabusomwan grossdomesticsavingsandgrosscapitalwhatmatterstotheirformationinaneraofeconomicrecessioninnigeria AT jessyezebuihe grossdomesticsavingsandgrosscapitalwhatmatterstotheirformationinaneraofeconomicrecessioninnigeria |