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A Note on Causal Relationship between FDI and Savings in Bangladesh
Theoretical and Applied Economics (2010)
  • Mohammad Salahuddin
  • Muhammad Shahbaz Shahbaz
  • Muhammad Irfan Chani
Abstract
This paper aims to investigate the causal relationship between foreign direct investment and gross domestic savings in Bangladesh over a period of 1985-2007. In doing so, Johansen cointegration technique and error correction methods are employed to examine the long run and short run relationship between foreign direct investment and gross domestic savings. To determine the direction of causality, we used innovation accounting approach. Results suggest that there exist bi-directional causal relationship between foreign direct investment and gross domestic savings but the movement is stronger from domestic savings to foreign direct investment. The result also implies complimentary relationship between them and as such, policy makers in Bangladesh need to focus on the determinants of both FDI and domestic savings in order to accelerate its growth.
Keywords
  • FDI; Gross domestic savings; causal relationship
Publication Date
2010
Citation Information
Mohammad Salahuddin, Muhammad Shahbaz Shahbaz and Muhammad Irfan Chani. "A Note on Causal Relationship between FDI and Savings in Bangladesh" Theoretical and Applied Economics Vol. 17 Iss. 11 (2010)
Available at: http://works.bepress.com/chani/3/