Savings Gap and Its Limiting Policies in the Palestinian Economy for the period 1994-2009 A.D

Abstract

The objective of this research is to study the saving gap and the sources

of its funding and identify the most important related factors affecting this

gap as one of the major structural imbalances and challenges facing the

Palestinian economy in the period 1994 - 2009.

The research depended on the descriptive analysis of the variables of

national accounts, the general budget and the balance of trade of commodity

and service, as well as quantitative analysis. The researcher used a form of

multiple regressions to measure the impact of some macroeconomic variables

in the savings gap, but the test did not show any indication for the significance

of these variables used in the regression equation, which has to be replaced

by Pearson correlation analysis of factors related to the savings gap. In

addition, it was also used to analyze the elasticity to measure the impact of

domestic savings on gross capital formation (investment) .

The results of the research showed that the saving gap positively correlated

significantly with a number of macroeconomic variables, especially between

the final consumption expenditure, the deficit in the general budget, the deficit

in the balance of trade of commodity and service, net current transfers from

abroad and GDP. These increases accompanied these variables during the

period under study accompanied by the widening of domestic savings.

The results showed the inability of domestic savings to cover local

investments, and hence there was a reliance on foreign savings to cover the

gap of domestic savings, in addition to the fluctuation in savings gap and

the weakness of flexibility of gross capital formation (investment) relative to

changes in savings. In the light of these results, a number of macroeconomic

policies have been proposed, and some recommendations directed towards

narrowing the gap savings, and reduction of its increasing have been

offered.