Date of Award

Winter 1981

Project Type


Program or Major


Degree Name

Doctor of Philosophy


The basic questions we address in this dissertation are the following: What was the relation between national savings and foreign savings during the 1960-1976 period for Senegal? What was the relative contribution of these two types of financing to economic growth?

A review of the literature reveals the coexistence of two main hypotheses. The first one stipulates that foreign financing and domestic financing are substitutes, whereas, the second one claims that they are, at the best, complements.

Numerous empirical studies using single equation models support the substitutability hypothesis. In other terms, they show a negative relationship between national and external savings.

We discuss the various limitations of the single equation models and we propose a "translog" model which allows us to compute the elasticities of substitution between national and external savings. The empirical evidence shows that the elaticities were positive, low and stable for Senegal during the period of study. The positive sign of these elasticities supports the substitutability hypothesis.

The next step was to find the net contribution of both foreign finance to the growth rate of income. To reach this goal, a growth model was proposed and the empirical results indicate that the impact of foreign savings was very limited. However, we point out that if foreign aid had been sued to improve the productive capacities of the Senegalese industries, its real impact could have been far greater than the one obtained from the model. The empirical evidence shows, also, that national savings did contribute to economic growth, especially, during the 1960-63 and 1968-76 subperiods.

The substitute effect of foreign savings on domestic savings and their limited impact on economic growth lead us to make some policy recommendations about the ways and means to raise and to allocate national savings toward productive investment. Moreover, some suggestions are made about a better use of foreign finance in the process of economic growth and development.