DETERNINANTS OF PRIVATE

SAVINGS IN CASE OF PAKISTAN

Submitted by
Sharafat Hussain

supervised by
Ms. Zakia Batool
 Chapters title

Introduction
Literature review
Methodology
Estimation
Conclusion and policies
 Introduction:
Saving is a crucial determinant of economics growth as the investments are
mainly financed by savings and higher investments boost up the rate of

economic growth.

In developing countries like Pakistan a larger proportion of domestic

savings consists of household savings.

Pakistans economy facing a number of challenges and shocks during from

last few years
 Objectives:

To investigate the determinants of private savings

To investigate rather Pakistan has the potential to boost the savings.

Is saving is the key factor to enhance the economic growth of Pakistan.

 Methodology:

This research is conducted to examine the impact of determinants of

private savings in case of Pakistan.

Model:

PS = 0+ 1PCI+ 2DR+ 3MLR+ 4FMLR+t

 Estimation Techniques:

Augmented Dickey Fuller (ADF)non stationary-Log first difference.

Long run relationship between variables analyzed co integration test.
VECM is used to check the short run relationship and speed of adjustment
Residual Normality test is used to check the distribution of model.
LM test is used for determination of the autocorrelation between two
successive error term.
 Data Source

VARIABLES SOURCE

Private Savings State bank of Pakistan

We have taken data from 1980 to 2010 and it was time series data of variables
Dependency ratio Economic Survey of Pakistan
Per Capita Income State bank of Pakistan
Male literacy rate Economic Survey of Pakistan
Female literacy rate Economic Survey of Pakistan
 Estimation Techniques:

Variables ADF (t-statistics) Critical value Order of integration

PS -3.036812 5% -1.949856 I(1)

Augmented
PCI -4.072516
Dickey Fuller Test: 5% -1.949856 I(1)

DR -4.008516 5% -1.449856 I(1)

MLR -7.408583 5% -1.950117 I(1)

FMLR -10.24682 5% -1.949856 I(1)

 Unrestricted Co integration Rank Test (Trace):
Hypothesized NO of Eigenvalue Trace Statistics 0.05 Critical Value Probability
CE(s)

None * 0.794934 137.6616 95.75366 0.0000

At most 1 * 0.673711 79.03792 69.81889 0.0077

At most 2 0.395782 37.59893 47.85613 0.3198

At most 3 0.239333 18.95760 29.79707 0.4959

At most 4 0.181043 8.835905 15.49471 0.3808

At most 5 0.038330 1.446114

Trace test indicates 2 cointegrating eqn(s) at the 0.05 level
3.841466 0.2292
* denotes rejection of the hypothesis at the 0.05 level
 Unrestricted Co integration Rank Test(Maximum Eigen
Value)
Hypothesized Max-Eigen 0.05
No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.494934 57.62371 43.07757 0.0000

At most 1 * 0.373711 44.43899 32.87687 0.0002

At most 2 0.295782 16.64133 29.58434 0.4437

At most 3 0.439333 17.12169 27.13162 0.5332

At most 4 0.281043 9.389791 18.26460 0.6441

At most 5 0.048330 7.446114 17.841466 0.3292

Max-eigenvalue test indicates 2cointegrating eqn(s) at the 0.05 level
 Normalized Co integration Coefficient

Variables Coefficients Standard Error t-statistics

PS
1.000000 - -

PCI
-1.678202 0.18854
-8.90104
DR
1.1431900 1.04963
1.089136
MLR
-5.355563 4.17805
-1.28183
FMLR
-7.405936 5.11205
-1.44872
 Residual Normality Test:

Component joint

Jarque-bera 18.01754

Probability 0.1211
AR Roots Graph:
 Conclusion and Policies

Long run Economics growth of a country depends on persistent investment

which is financed by domestic savings. In this paper we have examined the
determinants of private savings by applying different tests and techniques.
The results of the test point towards the positive impact of per capita income,
education of male and females but negative of dependency ratio.
So in order to increase the saving rate in Pakistan,

There is a need to focus on improving the education of both males and females
because education increases not only the employment opportunities but also
improves the capabilities of both males and females to manage household
expenditure.
Per capita income appears to have positive influence on savings. The policy
implication that can be drawn from our study is to increase household savings;
there is a need to increase the incomes of households.