The Relationship Between Savings and Investment: Evidence From Jordan

Abstract

Purpose: This study aimed to examine the relationship between savings and investment in the Jordanian economy during the period (1980-2020). Design/Methodology/Approach: This study was done using Augmented Dicky Fuller and Phillips-Perron unit root tests, and Lumsdaine and Papell unit root tests with structural breaks to determine if the time-series variables are stable or not. The Autoregressive Distributed Lag (ARDL) Bounds test method was used in this study to test long-run relationship between savings and investment Findings: The findings of the Bounds test suggest a term savings-investment relationship. This outcome is consistent with a number of recent research reviewed in the literature that have shown that saving and investment are co-integrated in the long term. Practical implications: keeping a sustainable supply of savings should be a top policy goal for economic stability, which can assist policymakers and institutions in selecting their future actions.