Savings, Investments and Growth Rates

Aims: In this article, we will apply the multinational view to explore the relationships between saving, investment and economic growth. We will explore the dynamic relationship among these three factors from the empirical perspective. We are going to compare the mutual influence among these three factors and try to figure out the dynamic correlation. And find out the factors that influence economic growth the most in the short run and long run respectively. Method: For the research purpose and the contents, our article applies several methods such as literature research, quantitative research, comprehensive analysis and logical induction and comparison research. We separate two parts to analysis. In the first part we will use the stepwise regression method to prove our five assumptions and through path analysis to calculate path coefficient. In order to guarantee the stability of these data, these indexes apply the average value of 214 countries from 2000 to 2011. In the second part, we will use a Cobb-Douglas production model to figure out the long run economic growth behavior, we will introduce the concept of total factor productivity. And use the data of a sample space of 35 in the interval of 1975 to 2009. Limitations: Firstly, the paper didn’t investigate datum on further step, or has deeper proceeding of default datum, the data quality might occur to important influence to the conclusion, it did need to take cautious attitudes. Secondly, the paper acquires relative simple control variables, where default datum of control variable might induce strong influence on the conclusion, thus a deeper analyses need take many various factors into considerations, in order to analyze net effects of two variables. Thirdly, it clarifies from the degree of fitting, the paper using relative simple model, and does affect quality of the process, to get deeper analyze then needs more precious model for further analyze. Conclusion: This paper provided evidence to show economic growth is positive related to saving and investment and is negative to income level. Saving rate is positive related to income level and positive related to investment level, saving rate has indirect effect on economic growth, and saving rate has indirect effect on economic growth via investment rate. And there is a close relationship between investment and economic growth. Solow residual indicates that we will have to rely on the technology progress to increase efficiency in the long run