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Financial sector development and domestic savings in South Asia

Authors
Journal
Economic Modelling
0264-9993
Publisher
Elsevier
Volume
33
Identifiers
DOI: 10.1016/j.econmod.2013.04.018
Keywords
  • Financial Development
  • Savings
  • Determinants
  • South Asia
Disciplines
  • Agricultural Science

Abstract

Abstract Given the limited capital flows to developing countries in South Asia, domestic savings is the primary source of investment and growth. Financial sector development and access to financial institutions are important determinants of savings ratios in developing countries. In this context, we empirically examine the role of financial development on savings ratios of five South Asian countries after controlling for other relevant variables for the period 1975–2010 and also for two sub-periods—the pre-reforms period (1975–1991) and the post-reforms period (1992–2010). We find that financial sector development positively affects total and private savings in South Asia along with per capita income, share of agriculture and foreign savings. Results also support the humped-shaped relationship between financial development and savings. The causality results support that financial development leads to higher savings mobilisation in South Asia.

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