Causal Relationship between Gross Domestic Saving and Economic Growth in Indonesia

Abstract

The study attempts to determine the relationship between gross domestic saving and economic growth in Indonesia since theoritically speaking saving is crusial for economic development. We analyzed the short run and long run causality of the variables using quarterly data from 1990 to 2020 by utilizing Autoregressive Distributed Lag (ARDL) and Granger Causality. The empirical analysis was based on those method found that cointegration of variables only existed in one model developed, whilst the other model demonstrates the short run relationship. Our study found that economic growth does Granger cause gross domestic saving and gross domestic saving does not Granger cause economic growth which is contrary to the conventional wisdom that causality runs from saving to economic growth.