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SAVINGS AND ECONOMIC GROWTH IN MALAYSIA

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Author(s): Hafizah Hammad Ahmad Khan | Zaherawati Zakaria | Dr. Hussin Abdullah | Nik Suriati Nik Hassan | Mahazril ‘Aini Yaacob

Journal: Economics and Finance Review
ISSN 2047-0401

Volume: 1;
Issue: 6;
Start page: 55;
Date: 2011;
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Keywords: Savings | Economic growth | GDP | Granger | Granger causality Test | Malaysia

ABSTRACT
Nowadays, saving regularly been seen as an important source for investment which indirectly influences the economic growth. However, some past literature has shown that higher savings was due to higher economic growth. Therefore, this study aims to examine the causal relationship between savings and economic growth in Malaysia by using Granger causality test. The empirical analysis is based on time series data for 30 years from 1978 to 2007. The findings reveal that savings granger causes economic growth and not vice versa. Therefore, policies that encourage savings should be designated so as to enhance the economic growth in Malaysia. The availability of a wide range of savings instruments for savers and easily accessible instrument, for example, is a necessary condition for effective mobilization of the nation’s savings. In future research, the ongoing evolution of an innovative, dynamic and diversified financial system in Malaysia is necessary so as to always encourage Malaysian people to save and invest for their future.
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