Empirical Modelling of Private Savings: An Application of Cross Markov Chain Method and General to Specific Approach
Author: Rabia Nisar

This study investigates the determinants of Private Savings of Pakistan by applying modern technique Cross Markov Chain Method (Cross MCM) first explored by a Russian mathematician Andrey Andreyevich Markov (1856-1922) on the cross country analysis. Keeping in mind that the data is incapable of giving us final results in the absence of the economic theory, but clues only. The data of the variables are retrieved from WDI. Using the variables from the theory, as the initial step the associations among the dependent variable i.e. Private Saving and the independent variables; Financial Development, Interest Rate, Dependency Ratio, GDP, Inflation, Remittances, Trade and Tax; are to be found out to look for clues from the data that whether they support the theory or not. This technique is applied on all countries altogether as well as for the separate category of the low and middle income countries. Finally, applying the General to Specific Approach from the theory of reduction by Davidson, Hendry, Srba and Yeo (1978) on the variables that are found to be significantly associated with the macroeconomic variable, using time-series data of Pakistan. In short-run, it is found out that Dependency Ratio, Interest rate and trade have their impact on the Private Savings. Whereas, there is 5% speed of adjustment towards the long-run calculated by Error Correction Mechanism. Supervisor:- Dr. Saud Ahmed Khan

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Supervisor: Saud Ahmed Khan

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