Bangladesh Bank Training Academy Journal

Abstract

This paper aims to delineate the relationships between saving and economic growth. It also focuses on the demographic correlates of saving, rooted in the life-cycle hypothesis of Modigliani and tries to confirm the validity of that hypothesis. This study attempt at estimating the saving function and growth function as a system of equations using three stage least square method with data from 1981-2017. It also attempts to differentiate the responses of the developed and developing countries. The results show that, saving plays an important role in economic growth regardless the economic condition of a country. But the life-cycle hypothesis and the variables related to it explain variation in domestic saving rates of the high-income countries much better than it does that of the low-income countries.