Interrelationship Among Inflation And Saving: Empirical Evidence From The Emerging Economy Of Pakistan

Abstract

The main target of most countries is to achieve economic growth with the increasing saving amount and with a lower inflation rate. The interrelationship in inflation, saving, and economic development in Pakistan is the main target of this research from the period 1983 to 2020. For the estimation of data, the time series econometric model was used in this study. The non-linear Autoregressive distribution lags (NARDL) were applied in the estimation process. The interrelationship among the variables enables us to understand through the long and short-run model. Gross national saving has positive and important impact while inflation is having a negative but substantial impact on the economic growth in the long term. Economic growth and CPI is a optimistic and substantial result on the gross domestic saving. Economic growth represented a optimistic but inconsequential effect on the CPI while gross domestic saving had a positive and important impact on CPI. The short-run result showed that gross domestic saving was a positive but insignificant influence on economic growth whereas inflation was a adverse but significant impact on economic growth. The economic growth and CPI had a significant and positive impact on the gross domestic saving. Economic growth was a positive but positive but insignificant influence on inflation while gross domestic saving was a negative but substantial effect on inflation rate. Based on the research it is recommended to the policymakers to raise savings in the economy government should promote economic growth in the country. By controlling the money supply inflation rate will be lower and should attempt to keep inflation in the single digits.