The Corruption Challenge for Accelerating National Savings in Pakistan: A Fiscal Policy Perspective

Abstract

The paper focuses on the theory of national savings and role of socio-economic factors; predominantly “control of corruption” & “institutions” in affecting the savings rate in Pakistan. The paper employs ADRL model to empirically test the concern of rising corruption in developing country like Pakistan. The results suggest that gross domestic product, net exports, government expenditures, control of corruption, age dependency ratio and real interest rate share a long run relationship with national savings in Pakistan. On the same hand, the results from short-run parameters (ECM) suggest that all explanatory variables except control of corruption (current year) and age dependency ratio have significant impact on saving rate. Since, institutions are embodied in the social structure of a countries and its process of ages to move to open access social order and thus, control of corruption shows results in long run.  Policies targeting strong institutions, with a focus on control of corruption (taken as socio-economic determinant of national savings) would breed efficiency and transparency in system which would lead to more employment opportunities.