Do Gross National Saving and Gross Capital Formation Contribute to Oman’s Economic Growth? An Empirical Study

Abstract

The purpose of this study is to examine the relationship among gross domestic product (GDP), gross capital formation (GFC), and gross national savings (GNS) at the current price level in the Oman economy. This study also looks at the long-term relationship between GDP and the GFC and GNS. The study's main objectives are to find out the causal relationship between GDP, GNS, and GFC and identify the long-run cointegration between GDP, GFC, and GNS at the current price level. The study has taken secondary data from the last 10 years (2010–2021). The study design is longitudinal as time series data have been used to meet our objectives. The study applied the correlogram test to check whether the series are stationary or not. and also, the Granger causality test to find the direction of the GDP, GFC, and GNS. This study further used the Eagle Granger residual-based cointegration test and DOLS approaches to identify the long-run cointegration between GDP and its independent variable. With the application of the correlogram test, it has been discovered that GDP and GFC are stationary at their current levels, whereas GNS is stationary at the first difference to satisfy the assumption of the cointegration test. The study reported that there is no significant relationship between saving, capital formation, and economic growth at current prices in Oman ‘s economy. However, the finding also that there is no long-run cointegration between GDP at current prices and GNS and GFC Overall, the findings of the study are based on current prices, which affect nominal GDP. Provide the evidence, as in Oman the savings rate is very low, which means a reduction in capital formation, so it is suggested to focus on other variables that could result in constant growth of the country's economy in the long run.