Saving Behavior: A Critical Analysis Of Literature

Literature review

2.1 Introduction

Literature review is a critical analysis of published sources in a particular subject area or it is an evaluation of significant research materials such as articles, books, publications etc. Basically a literature review includes important information and concepts from published sources and ultimately grouping them into relevant topics and subject of interest. Hence this chapter explains the theory for the research study and try to discover how each independent variable affect the dependent variable by analyzing and reviewing previously published literature sources related to the topic.

2.2 Review of the Literature

2.2.1 Saving behavior (Dependent variable)

According to Kotlikoff (1992) saving means

This saving behavior can be differ according to various aspects which we called as determinants of savings. Basic determinants of savings are level of income, consumption motivations, wealth, habit, rate of interest, other institutional factors etc. Main reason for the difference among saving behavior of different categories of people is because these categories people comprise of different compositions of above mentioned factors. For an example savings of young people of a country would be lower than savings of middle aged people since level of income of middle aged people is much higher than the income level of young generation. On the other hand consumption motivations also determines the saving behavior of various parties where some people seek more to consume and less to save while some people, more to save for future consumption needs or for potential investment opportunities. Higher interest rates and other fringe benefits providing by various financial institutions and banks also drive people to save more and more. Not only that, millennials should have good financial habits to enhance the savings. As per (Johnsan and Sherraden 2006, p. 9) building assets through saving early on and developing sound financial habits can positively influence the course of a young person 's life. Hence people determine the proportion of saving out

Time period of 1985- 2009. Auto regressive distributed lag (ARDL) model, bound testing approach to co- integration were used to delineate the short ? run and long- run relationship between income level and saving behavior. The data of variables ? savings, Income level, and Inflation and Age dependency ratio is collected from World development indicators (WDI), mark 2010 online from the official web site of World Bank with the frequency on annual basis from 1985 to 2008. They determine in short and long run a one percent rise income level increases savings by 1.82 and 5.14 percent respectively, in long ? run one percent increase in inflation and ADR result in decline of savings by 3.15 and 13.60 percent respectively, income level is equally important and highly positively significant to savings behavior in