SAVINGS, REMITTANCES AND ECONOMIC GROWTH IN NIGERIA: A VAR APPROACH
This study uncovers the direction of causality between savings, foreign remittances and economic growth in Nigeria from 1980 to 2017. Using a Vector autoregressive (VAR) approach, it employs Johansen cointegration test and Toda -Yamamoto causality test to analyze the relationship. DF-GLS unit root tests and Augmented Dickey-Fuller (ADF) test is used to verify the presence of unit root. The result indicates that there is a unidirectional causality from savings to economic growth in line with finance-growth theory and bidirectional causality between savings and remittances. The study revealed that even though both savings and remittances are positive and significant to growth, the effect of savings is long-lasting and permanent. Financial institutions should increase its financial inclusion programs and implement policies that would enhance domestic savings. While Government policies that would enhances economic growth through selective financing of industries and SMEs with multiple positive spillovers should be implemented. In addition, receivers of remittances and small domestic savers should be encouraged to establish small income yielding enterprises which will ultimately boost the country’s economic growth, through increased output and employment
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