International Journal of Economics and Finance Studies

Domestic savings and economic growth are two important macroeconomic variables, which play a significant role in the development of any economy. In economic literature, savings are perceived as a drive for economic growth. The low domestic savings and low economic growth in South Africa founded the purpose of the study. Annual data taken from the South African Reserve Bank (1994 to 2018) was employed. Methodologically, the Johansen multivariate approach and the vector error correction model were employed. The long-run findings suggest that domestic savings affect economic growth positively. This finding is in line with the Harrod-Domar, Keynes and Solow theories. In the short run, corporate saving is positive and significant in explaining the behaviour of growth in South Africa. Furthermore, the variance decomposition findings reveal that the variability of household savings has a greater influence in explaining the change in economic growth. South African policymakers should focus on policies that promote domestic savings, which will lead to the stimulation of economic growth. As such, policies that increase incentives on savings need to be implemented to encourage domestic savings within the country.