Institutional Variations in Saving Behaviour in Pakistan

In: The Pakistan development review: PDR, Band 32, Heft 4II, S. 1293-1311

Abstract

Savings and investment are two variables that play a
significant role in accumulation. Variations in these key variables have
a significant impact on economic growth, employment and inflation. A
thorough understanding of their determlnants provides an important
insight into the development process and aids in policy formulation.
Such knowledge is also necessary to trace the consequences on growth and
employment which may work through savings and investment behaviour. A
particularly useful approach to understanding the macro-behaviour of
saving and investment is to conduct an empirical analysis in terms of
institutional agents. In fact, most of the current work in Pakistan is
restricted to estimating aggregate savings functions which are not
sufficient for analysis of savings behaviour mainly because various
institutional agents may respond differently to economic signals. For
example, foreign interest rates may attract private savings to transfer
abroad, while the public sector may generate its own savings in response
to increasing foreign interest rates. It can also be argued that the
inflow of foreign capital may encourage private savings through direct
foreign investment and discourage public savings through the
substitution effect. Many other examplescan be quoted on theoretical
background. Therefore, it may be useful to estimate disaggregated saving
functions. The question, "are there institutional variations in the
savings behaviour of household. corporate and public sectors in
Pakistan?" will be the main focus of this paper.