The relationship between private saving and economic growth in Thailand

One macroeconomic goal in many countries is to stimulate their economic growth rate. A higher growth rate means higher national income, output, and living standards. Theoretically, saving, investment, and consumption may stimulate economic growth. This is dubious, according to research. Furthermore, the nonlinear relationship between saving, investment, consumption, and economic growth has yet to be examined in any Thai study. This study first investigates the dynamic link between private saving, investment, consumption, and economic growth using the Vector Autoregressive model (VAR). Further, we examine the non-linear relationships through the two-regime Markov switching VAR model. We employ annual data between 1981 and 2021. For the linear relationship, we found that changes in the ratio of private and business savings to GDP affect GDP growth positively. The causal relationship goes from private saving and business saving to GDP growth. An increase in the shock of savings to GDP caused the GDP growth response to increase significantly in the following year. Moreover, we found that private savings and their components positively impact investment. According to the Markov switching model, investment and consumption growth influence GDP growth across regimes. Both influence GDP growth in high-growth regimes in a positive way. Only household savings per GDP positively affect investment growth under the low regime.