Determinants of Gross National Saving in Ethiopia

The objective of this paper was to investigate the macroeconomic determinants of gross national saving in Ethiopia using time series annual data form 1970/71-2010/11. Effort has been made to identify the long run and short run determinants of national saving in Ethiopia using an ARDL bounds testing approach to capture both short run and long run relationships. Estimated results revealed that financial development and Current account deficit are significant determinants of gross national saving, but gross national disposable income, dependency ratio,budget deficit and inflation found to be statistically insignificant determinants of gross national saving in Ethiopia in the long run.However, in the short run, except consumer price index and dependency ratio the rest of the explanatory variables such as gross national disposable income,financial development,current account deficit and budget deficit found to have statistically significant meaning in explaining gross national saving in Ethiopia. The speed of adjustment has value 0.66978 with negative sign, which showed the convergence of saving model towards long run equilibrium.