Saving mobilization and its impact on economic growth: a case study on Bangladesh

This paper examines the role of saving in accelerating economic growth in Bangladesh and estimates a simultaneous equation related to this to assess the impact of various factors in determining savings and economic growth in Bangladesh with special emphasis on the impact of financial sector reforms initiated in the late 1980s. The findings reveal that the growth rate and real rate of interest have a positive impact on saving rate. Also the dummy variable (financial reform index) has a significant positive effect on saving rate indicating that the financial sector reform has ultimately enhanced saving rate in Bangladesh. Population per branch of scheduled banks, on the other hand, is negatively related to saving rate suggesting that increased availability of branches of banks can stimulate the saving tendency of people. Further, financial savings in turn, foreign direct investment and literacy rate positively affect the growth rate of the economy. Our findings also confirm the saving-growth simultaneity reflecting that saving and growth positively affect each other and go hand to hand