Savings Behaviour In South Asia

Savings behaviour is important because of the close relation between savings and growth. Further, the direction of causality between savings and growth is of critical importance for development policy. Thus this paper presents individual country analysis of the savings behaviour in five main South Asian countries, namely India, Pakistan, Bangladesh, Sri Lanka and Nepal, using modern time series procedures. Our results show that savings in South Asia are mainly determined by income, access to banking institutions, foreign savings rate and dependency rate. The impact of the real interest rate on savings is minor and inconclusive in direction. Further, the direction of causality is primarily from income or growth to the savings rate in South Asia.