Examining the relationship between savings and growth income levels
Wangui, Njuguna Christine
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Given the launch of the Vision 2030 which focuses on the potential of the different sectors to make a wide economic impact and the feasibility of unlocking that potential for the benefits of economic growth, employment and poverty reduction the government has a forecasted 10% growth rate. The state is therefore seeking to increase savings in the economy through creating more jobs. This study addresses the relationship between savings and growth for countries with different income levels. It uses time series data; Gross Domestic Product (GDP) and Gross Domestic Savings (GDS) to test for the relationship between savings and growth. The method of analysis used is Granger Causality. The study seeks to determine whether the relationship between savings and growth based on the different income classes: low income, middle-income and high income countries. In addition to this the study intends to check where the causality is more prevalent in order to determine where the relationship is most significant. The results of the study indicate that the relationship between savings and growth is more prevalent in high income countries. In low income countries the results are mixed. Middle income countries indicate a high presence of a relationship between savings and growth.