Determinants of Gross Domestic Saving and its Trend Analysis in Turkey: A Time Series Outlook

Abstract

Saving is an engine for the growth and prosperity of a nation by creating capital accumulation and financial investments through resource mobilization. Turkey appears in the set of countries that have relatively low domestic saving rates and relatively high current account deficits. This study examined the determinants of Gross Domestic Saving and its trend in Turkey, using time series data (annual) ranging from 1980-2018. Data were collected from the World Development Indicators (WDI) 2019 database, World Bank, and Central Bank of Turkey annual reports. The macroeconomic variables used in the model were Gross Domestic Saving rate to GDP ratio (GDS), Inflation Rate (INF), Deposit Interest Rate (DIR), Broad Money Supply to GDP ratio (M2R), Age-Dependency Ratio (ADR), and Growth of Gross National Income Per Capita (GNIPCG). The study has used the Auto-Regressive Distributed Lag (ARDL) model and appropriate diagnostic tests for model specification. The results of the study have shown that the first lag of Gross Domestic Saving, Inflation Rate, Age-Dependency Ratio, and Broad Money Supply to GDP ratio have positive effects, whereas Gross National Income Per Capita Growth and Deposit Interest Rate have negative effects on Gross Domestic Saving rate in Turkey. Only the first Lag of Gross Domestic Saving rate and Deposit Interest rate have statistically significant effects on Gross Domestic Saving in Turkey at a 5 percent level of significance. The rest of all variables have statistically insignificant effects. The overall findings of the study underlined the importance of adopting strict fiscal and monetary policies to regulate inflation and money supply with manageable levels to improve the Gross Domestic Saving rate in Turkey.