Determinants of domestic saving in Ethiopia: A vector error correction approach

Abstract

The intent of this paper is to determine determinants that affect domestic saving in Ethiopia using a 30 years' time series data. VECM were used to identify the major long run and short run determinants that affect domestic saving in Ethiopia. The estimated result of the study revealed that in long run, level of real per capital income and consumer price index are positive while government consumption ratio and inflation rate have negative influence on domestic saving. However, in the short run, consumer price index affect domestic saving negatively. Thus, minimizing government consumption expenditures are required to enhance domestic saving.