Abstract:

The source of economic growth is the increase in production. Increasing production can be achieved by increasing the amount of production factors or the development of technology. Therefore, another way to increase production is to increase capital accumulation that can be achieved through investments which are financed by domestic savings. Higher domestic savings, leading to increase loanable funds, both reduce the financing costs and dependence on foreign sources. Thus, while investments increase without causing a pressure on the balance of payments, economic growth is accomplished by capital accumulation and a providing increase in production. This significant effect of domestic savings on economic growth has widely taken place in the literature. Although the linear relationship between domestic savings and economic growth is generally accepted in the literature, the direction of causality between them is still a controversial issue. For this purpose; the direction of relationship between domestic savings and economic growth has been investigated using panel data analysis with data of the world's largest 20 economy. At the end of the study; it has been concluded that ensuring sustainable high growth for especially developing countries domestic savings is an important variable and domestic savings increase economic growth

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