AN ANALYSIS OF THE RELATIONSHIP BETWEEN HOUSEHOLD SAVINGS AND ECONOMIC GROWTH IN TURKEY

Year 2017, , 29 - 33, 30.12.2017

Aylin Erdogdu

https://doi.org/10.17261/Pressacademia.2017.741

Abstract

Objective-
The household saving tendency has been accepted as one of the most important
financial instruments in the development of the countries for hundred years.
The impact of economic crisis have become much more intense, recently due to
the disappearance of borders between the countiries. This situation, while
increasing households' anxiety about the future, has also strengthened their
saving tendencies. In Turkey, the decline in household savings, the negative
effects on macroeconomic data, and the positive effects of savings on
development have all come in to prominence lately. The purpose of study in this
context is to investigate the effects causing increase and decrease in
household savings of Turkey and to reveal their impact to economic growth.   

Methodology-
 In this study, the relationship
between household savings and economic growth have been analyzed with the VAR
model given in the quarterly frequency in 2002 / 1-2017 / 1 period data for the
Turkish economy. The indicator of the inflation rate is selected as the TUFE
price index which is accepted as the best reflector of the price movements.
Concerning the interest rate, the weighted average interest rates applied to
the deposit accounts of the banks are used. Financial deepening is included in
the model by proportioning to M2 / GDP. The high level of this ratio indicates
that the funds in the financial sector are able to meet the funding demands of
the real sector. The credit volume, unemployment rate, real exchange rate,
industrial production index and manufacturing industry capacity utilization
rate data have been included in the study in order to make the model more
sophisticated as they have considerable impact on savings. Finally, Eviews-9
program is used for econometric applications.

Findings-
According to the findings, there is a positive relationship between economic
growth and savings in the relevant period for the Turkish economy, consistent
with theoretical explanations and earlier empirical studies. However, according
to the findings of the study, the most important factor determining household
savings is real exchange rate. In this context, it seems difficult to increase
the household savings in Turkey without stabilizing the exchange rates. The
implementation of macroeconomic policies that will increase income and reduce
structural vulnerabilities will raise the value of the Turkish lira in the
medium to long term and will sustain the value of the Turkish lira in the short
term thus will encourage savings.   The
impact of economic growth on savings comes after the unemployment rate, the
inflation indicator, the TUFE price index and the industrial production index,
representing the real sector. As a result, the sociological effects of changing
consumption trends are observed.

Conclusion-
According to the results and inferences of the study; it might be advisable
to implement policies that will mobilize market dynamics to improve savings at
micro-scale in policy preferences for increased savings. In general, it might
be worthy of recommendation to prioritize structural policies that might
influence household investment habits. For example, awareness-raising projects
regarding the benefits of saving can be developed in order to increase
household savings. The saving culture could be explained via cooperation in
technology and social media in order to disseminate the implementation of the
project to the public. Trainings can be provided to enhance the financial
literacy level of the households and increasing their cognizance with regard to
the subject. It can be argued that dividing the increases in household incomes
into conscious spending and individual pension systems on credit cards will
play an important role in expanding the savings base and rendering the savings
sustainable. 

Keywords

Economic growth, Granger Causality Test, Households Savings, Johansen Cointegraiton Test, Var Analysis

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