Journal of Harmonized Research in Management

THE EFFECT OF INFLATION ON THE GROSS DOMESTIC SAVINGS IN ETHIOPIA

Abstract

Author(s): Demilie Basha Hailu and Samson Abay

The paper Endeavors to investigate the magnitude and direction effect of inflation on the gross domestic savings. In doing so, the writers undertake different diagnostic tests such as Augmented Dic ky Fuller unit root tests, Ramsey functional misspecification test (RESET) hetroscedasticity, autocorrelation etc. Moreover, we use the Engle-granger co-integration approach to test the existence of long run associations among economic variables. Accordingly, the model doesn’t confirm the existence of long run relationships and hence the short run model suggests that there appears an inverse relationship between macroeconomic uncertainty (inflation) and gross domestic savings. Moreover, the result reveals insignificant influence of real interest rate and a significant and positive effect of real GDP on savings. Keywords: Inflation, Savings, Ethiopia