Macroeconomic determinants of national savings revisited: A small open economy of Pakistan

This paper explains the determinants of national savings in the process of economic growth in the glimpse of Pakistani experience. Using Autoregressive Distributed Lag Model (ARDL) bound testing approach for co-integration techques to check the robustness for long run relationship and Enor Correction Mechanism (ECM) for sholt run dynamics d u r q the 1974-201 0. It is found that the per capita income inversely related with national s a v q rate, both in long run and as well in short run significantly. The exchange rate and inflation rate have a negative impact on national saving but lagged exchange rate has sig~llficantly impact. Because of floating exchange rates and the decrease in capital controls, the volume of international capital flows in a counhy, has increased significantly. Trade openness is positive associated with national savings in Pakistan because trade openness cause to increase the income and welfare of the society in through market economy. Money supply positive linked with national saving due to seigniorage effect. The growth of the income level has negatively related with national savings. Keynesian and permanent income hypothesis of income and savings is not valid for Pakistan because per capita income and income growth invers function of savings at national level.