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Does saving really matter for growth? Mexico (1970–2000)
Author(s) -
Alguacil Maite,
Cuadros Ana,
Orts Vicente
Publication year - 2004
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.1075
Subject(s) - nexus (standard) , economics , foreign direct investment , causation , granger causality , causality (physics) , investment (military) , macroeconomics , variable (mathematics) , growth model , international economics , econometrics , political science , mathematics , mathematical analysis , physics , quantum mechanics , politics , computer science , law , embedded system
This paper uses the Granger non‐causality test procedure developed by Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996) to analyse the saving‐growth nexus in Mexico. Contrary to the reverse causation between national saving and domestic income found in recent empirical studies, evidence is presented in favour of Solow's model prediction that higher saving leads to higher economic growth. The confirmation of a saving‐growth nexus in this country seems to be related to the inclusion of foreign direct investment (FDI) in the model, as the most relevant component of foreign saving. As this study will try to show, this last variable enhances economic growth and reinforces the connection between the two focus variables in the analysed country. Copyright © 2004 John Wiley & Sons, Ltd.