Analysis of the Relationship Between Domestic Saving and Economic Growth in the ECOWAS Zone: Panel ARDL Analysis (2000–2020)

In a context of scarcity in the mobilization of external resources in developing countries, the mobilization of domestic resources becomes a determining factor for development financing. Indeed, this paper analyzes the relationship between savings and economic growth in thirteen countries of Economic Community of West African States (ECOWAS) namely Benin, Burkina Faso, Cote dIvoire, Gambia, Ghana, Guinea, Guinea-Bissau, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo over the period 2000-2020 on a sample size of 14,130 by focusing on domestic savings. The main contribution of analyzing the impact of savings on growth in a regional space, while highlighting the analysis in a monetary and non-monetary union. To do so, we used the ARDL model to analyze the long-run and short-run impact of domestic savings on economic growth by highlighting the impact of membership in a monetary union on the savings-growth relationship. The panel ARDL model is to show short-term and long-term relationships between variables, while handling series that do not have the same integration order and offering great flexibility and robustness for small samples. The results show a positive and significant impact of savings on long-term economic growth in the ECOWAS zone, but membership in a monetary union has no impact on the savings-growth relationship. However, the results show a significant and negative impact between foreign direct investment (FDI) and economic growth over the long term in the WAEMU zone alone, demonstrating that membership of a monetary union has an impact on the FDI - economic growth relationship. This shows that foreign direct investment has a negative impact on economic growth in WAEMU countries. In addition, our study found a bidirectional relationship between savings and economic growth. In view of these results, ECOWAS authorities should implement policies to mobilize domestic savings in order to finance development policies. And, by having sustainable, stable and inclusive growth, the political authorities should develop incentives to mobilize domestic savings and avoid dependence on external resources, which are becoming increasingly scarce. ECOWAS authorities should also accelerate the process of creating a monetary union in order to take advantage of savings mobilization policies.