PRIVATE SAVING IN GHANA: THE COMBINED EFFORTS OF FINANCIAL DEVELOPMENT, INTEREST RATES, AND INFLATION

Authors

  • Alnaa Samuel Erasmus Bolgatanga Technical University
  • Matey Juabin

Keywords:

Private Saving, FD, Interest Rate, Inflation Rate, VAR Model

Abstract

Understanding private saving behaviour of the citizenry is crucial for informed policy decisions in an economy. However, it does appear that much of the available literature is on aggregate private savings rather than on private saving behaviour. This study, therefore, updates the literature by looking at the combined effects of financial development, interest rate and inflation on private saving behaviour among Ghanaians.  Data for the study were obtained from the World Bank Development Indicators between 1980 and 2019. We employed Johansen Cointegration Test; attempts are made to ascertain the existence of a long-run relationship among variables using the Vector Autoregressive (VAR) Model. The study confirms a significant positive relationship between private saving behaviour and financial development. This partly explains the relevance of deepening the financial sector through reductions in costs of performing transactions and initiating contracts to improve domestic savings. A reliance on macroeconomic variables to forecast the behaviour of private saving enjoins policy decision makers to consider the implications of their decisions on domestic savings. The study recommends among others, that, negative interest rates be considered to boost consumption, weak growth, investment, and avoid inflation during economic stagnation.

Author Biography

  • Alnaa Samuel Erasmus, Bolgatanga Technical University

    Department of Accountancy

    Professor

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Published

2022-05-13

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PRIVATE SAVING IN GHANA: THE COMBINED EFFORTS OF FINANCIAL DEVELOPMENT, INTEREST RATES, AND INFLATION. (2022). Timisoara Journal of Economics and Business, 14(1), 23-38. https://www.tjeb.ro/index.php/tjeb/article/view/pdf