Savings and Investment Relationship and Domestic Capital Mobility in Bangladesh: A Cointegration Approach

Abstract: In order to evaluate capital mobility, the paper looks at the long-term relationship between saving and investment in Bangladesh. To determine whether the data have a unit root problem, we use the ADF test. This will demonstrate whether there is any short-term instability between saving and investing. The long-term relationship between saving and investment that measures domestic capital mobility has been examined using Johansen's cointegration estimation technique. This study examines the relationship between domestic saving and domestic investment in Bangladesh using data from 1980 to 2022. The short-run instability between saving and investing is confirmed by unit root results, but maximum likelihood estimation results support the null hypothesis of one cointegration vector. This ensures that a long-run relationship exists between saving and investment implying the mobility of domestic capital across Bangladesh. Keywords: Savings, Investment, Augmented Dickey-Fuller Test, Cointegration Test, Capital Mobility and Banglades