Examining the relationship between savings and deposit rates

Abstract

Using the VECM approach, the study analysed the link between savings rates in Zimbabwe and deposit rates and other macroeconomic variables for the period 1983 to 2006. The study established a long run relationship exists between the savings and deposit rates. The speed of adjustments toward long run equilibrium was found to be 83% per annum which is a swift adjustment. It was also established that shocks to savings rates in Zimbabwe explained much of the variances even up to ten years. This implies that savings rates are less exogenous, though inflation rates and deposit rates are the independent variables which explain variability in savings rates. It is against these findings that the Zimbabwean monetary authorities vary the savings rates directly to influence the volume of capital saved as all other independent variables influence savings rates after more than 5 years.