The effect of saving and capital expansion on financial and technological development in GCC countries
Abstract
This study examined the effect of the relationship between saving and capital expansion on financial and technological development in three GCC countries using panel data from 1990 to 2019. The study used panel least squares, feasible general least squares, dynamic ordinary least squares and fully modified ordinary least squares used in the study. The findings showed that there was a significant positive long-run relationship between capital expansion and financial development and was a positive and insignificant long-run relationship between saving and financial development. Conversely, the study showed that there was a significant positive long-run relationship between saving and technological development. Meanwhile, there was a negative long-run relationship between capital expansion and technological development. Pairwise Granger causality test results showed that there was bidirectional causality between saving and financial development, a single causal direction from Adjusted net national income and financial development and a single causal direction from technological development and saving and Inflation, consumer prices. The main conclusions of the study were saving tends to support technological development, while investment tends to improve financial development. Therefore, GCC countries should formulate a long-term growth strategy in all sectors to determine their development requirements in light of the available resources.
First published online 15 November 2021
Keyword : capital expansion, saving, economic growth theory, financial development, technological development, panel cointegration
How to Cite
Alshubiri, F. (2022). The effect of saving and capital expansion on financial and technological development in GCC countries. Technological and Economic Development of Economy, 28(1), 1–25. https://doi.org/10.3846/tede.2021.15769
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Hansen, H., & Rand, J. (2006). On the causal links between FDI and growth in developing countries. The World Economy, 29(1), 21–41. https://doi.org/10.1111/j.1467-9701.2006.00756.x
Hicks, R. (1969). A theory of economic history. Clarendon Press.
Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 7(3), 281–312. https://doi.org/10.1177/1536867X0700700301
Hsiao, C. (2007). Panel data analysis – advantages and challenges. TEST, 16(1), 1–22. https://doi.org/10.1007/s11749-007-0046-x
Jangili, R. (2011). Causal relationship between saving, investment and economic growth for India – what does the relation imply? https://mpra.ub.uni-muenchen.de/40002/1/MPRA_paper_40002.pdf
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2–3), 231–254. https://doi.org/10.1016/0165-1889(88)90041-3
Johnston, J., & DiNardo, J. (1997). Econometric methods (4th ed.). McGraw-Hill International.
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Katircioglu, S., & Nartaliyeva, A. (2006). Foreign direct investment, domestic savings and economic growth in Kazakhstan: Evidence from co-integration and causality tests. Investment Management and Financial Innovations, 3(2), 34–45.
Khundrakpam, J. K., & Ranjan, R. (2010). Saving-investment nexus and international capital mobility in India: Revisiting Feldstein-Horioka hy-pothesis. Indian Economic Review, 45(1), 49–66. https://www.jstor.org/stable/29793953
Krieckhaus, J. (2002). Reconceptualizing the developmental state: Public savings and economic growth. World Development, 30(10), 1697–1712. https://doi.org/10.1016/S0305-750X(02)00064-5
Kwark, N.-S., & Shyn, Y.-S. (2006). International R&D spillovers revisited: Human capital as an absorptive capacity for foreign technology. In-ternational Economic Journal, 20(2), 179–196. https://doi.org/10.1080/10168730600699556
Le, T. (2008). Brain drain or brain circulation: Evidence from OECD’s international migration and R&D spillovers. Scottish Journal of Political Economy, 55(5), 618–636. https://doi.org/10.1111/j.1467-9485.2008.00468.x
Le, T., & Bodman, P. (2011). Remittances or technological diffusion: Which drives domestic gains from brain drain? Applied Economics, 43(18), 2277–2285. https://doi.org/10.1080/00036840903153838
Lucas, R. E. Jr. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7
Ma, W., & Li, H. (2016). Time-varying saving–investment relationship and the Feldstein–Horioka puzzle. Economic Modelling, 53, 166–178. https://doi.org/10.1016/j.econmod.2015.11.013
Maddala, G. S. & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61(51), 631–652. https://doi.org/10.1111/1468-0084.0610s1631
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Masih, R., & Peters, S. (2010). A revisitation of the savings–growth nexus in Mexico. Economics Letters, 107(3), 318–320. https://doi.org/10.1016/j.econlet.2010.02.001
Mason, A. (1988). Saving, economic growth, and demographic change. Population and Development Review, 14(1), 113–144. https://doi.org/10.2307/1972502
Menéndez, R., Martín, A., Candamio, L., & Álvarez, M. (2021). An enhanced techno-economic analysis of LCOE public incentives vs private investment. Technological and Economic Development of Economy, 27(1), 1–23. https://doi.org/10.3846/tede.2020.11259
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