Abstract:
The wide range of controversies surrounding the direction of causality between
savings and economic growth necessitated this study. The study was
intended to investigate the relationship between gross domestic savings and
economic growth in Ghana; with the specific objective of finding whether
there exists a long run relationship between them, and it was also intended to
ascertain the direction of causality between the two running actors in the
study over the period of 1972 to 2013. The study employed Johansen cointegration
test to reveal no long run relationship between gross domestic savings
and economic growth in Ghana. This necessitated the usage of the VAR technique
to estimate the short run relationships. The finding was that there exists
a unidirectional line of causation running from gross domestic savings to
economic growth in Ghana. It is strongly recommended therefore that the
Bank of Ghana will use the monetary policy instruments to influence and advise
the commercial banks on the need to peg the deposit rate relatively higher
at least equal or little above the existing interest rate. This is because the deposit
rate is the opportunity cost of money demand for other purposes.
