The impact of savings on economic growth in a developing country (the case of Kosovo)

Abstract

The correlation between savings and economic growth has been the subject of research for some well-known economists. This study provides further insight on such correlation by examining the case of Kosovo from both a qualitative and quantitative research methodology. The data used was from 2010 to 2017 and has been analyzed using the augmented Dickey-Fuller tests, Johansen cointegration tests, and Ganger causality test. The test of the unit root confirms stationarity, and the regression results showed that deposits have a significant positive impact on Kosovo’s economic growth, because savings stimulate investment, production, and employment and consequently generate greater sustainable economic growth. Furthermore, loans and remittances also help boost the economy of Kosovo through their direct impact on investment. This paper confirms that countries whose national savings rate is high are not dependent on foreign direct investment; consequently, the risk arising from volatile foreign direct investment decreases significantly.