Di Iorio, Francesca and Fachin, Stefano (2010): A Panel Cointegration study of the long-run relationship between Savings and Investments in the OECD economies, 1970-2007.
Download (478kB) | Preview
In this paper we test for the existence of a long-run savings-investments relationship in 18 OECD economies over the period 1970-2007. Although individual modelling provides only very weak support to the hypothesis of a link between savings and investments, this cannot be ruled out as individual time series tests may have low power. We thus construct a new bootstrap test for panel cointegration robust to short- and long-run dependence across units. Thid test provides evidence of a long-run savings-investments relationship in about half of the OECD economies examined. The elasticities are however often smaller than 1, the value expected under no capital movements.
|Item Type:||MPRA Paper|
|Original Title:||A Panel Cointegration study of the long-run relationship between Savings and Investments in the OECD economies, 1970-2007|
|Keywords:||Savings, Investments, Feldstein-Horioka puzzle, OECD, Panel Cointegration, Stationary Bootstrap.|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models
|Depositing User:||Stefano Fachin|
|Date Deposited:||15. Oct 2010 00:18|
|Last Modified:||12. Mar 2015 15:25|
AmirKhalkhali S, Dar A, AmirKhalkhali S. 2003. Saving investment correlations, capital mobility and crowding out: some further results. Economic Modelling 20: 1137-1149.
Apergis N, Tsoumas C. 2009. A survey of the Feldstein Horioka puzzle: What has been done and where we stand. Research in Economics 63: 64-76.
Bai J, Carrion-i-Silvestre J. L. 2005 Testing Panel Cointegration with Unobservable Dynamic Common Factors mimeo, University of Barcelona.
Bai J, Ng S. 2004. A PANIC Attack on Unit Roots and Cointegration. Econometrica 72:1127-1177.
Banerjee, A. 1999. Unit Roots and Cointegration: an Overview. Oxford Bulletin of Economics and Statistics, 61: 697-629.
Banerjee A, Dolado J, Mestre R. 1998. Error-correction mechanism tests for cointegration in single-equation framework. Journal of Time Series Analysis, 19: 267-283.
Banerjee A, Carrion-i-Silvestre JL. 2006. Cointegration in Panel Data With Breaks and Cross- Section Dependence. Working Paper Series n. 591, European Central Bank.
Banerjee A, Marcellino M, Osbat C. 2004. Some Cautions on the Use of Panel Methods for Integrated Series of Macro-Economic Data. The Econometrics Journal, 7: 322-340.
Blanchard O, Giavazzi F. 2002. Current Account De�cits in the Euro Area: The End of the Feldstein-Horioka Puzzle? Brookings Papers on Economic Activity, 2: 147-209.
Breitung J, Pesaran MH. 2006. Unit Roots and Cointegration in Panels In .The Econometrics of Panel Data Matyas L, Sevestre P. (eds), Kluwer Academic Publishers: Dordrecht (NL).
Chinn, MD, Ito, H. 2008. A New Measure of Financial Openness Journal of Comparative Policy Analysis: Research and Practice, 10: 309-322.
Coakley J, Fuertes AM, Spagnolo F. 2004. Is the Feldstein Horioka puzzle history? The Manchester School 72: 569-590.
Chang Y, Park JY. 2003. A Sieve Bootstrap for the Test of a Unit Root. Journal of Time Series Analysis, 24: 379-400.
Chang Y, Park JY, Song K. 2006. Bootstrapping cointegrating regressions Journal of Econometrics 133: 703-739.
Coiteux M, Olivier S. 2000. The saving retention coefficient in the long run and in the short run: Evidence from panel data. Journal of International Money and Finance, 19: 535-548.
Engle RF, Granger, C. 1987. Co-integration and Error Correction: Representation, Estimation, and Testing Econometrica 55: 251-276.
European Commission. 2010. Report on Greek government de�cit and debt statistics Brussells (BE).
Fachin S. 2007. Long-Run Trends in Internal Migrations in Italy: a Study in Panel Cointegration with Dependent Units. Journal of Applied Econometrics 22: 401-428
Feldstein M, Horioka C. 1980. Domestic Saving and International Capital Flows Economic Journal 90: 314-329
Gengenbach C, Palm F, Urbain, JP. 2006 Panel Cointegration Testing in the Presence of Common Factors. Oxford Bulletin of Economics and Statistics 68-S1: 683-719.
Gregory AW, Haug A, Lomuto N. 2004. Mixed signals among tests for cointegration. Journal of Applied Econometrics 19: 89-98.
Groen JJJ, Kleibergen F. 2003. Likelihood-Based Cointegration Analysis in Panels of Vector Error-Correction Models Journal of Business and Economic Statistics 21: 295-318.
Hanck C. 2009. For which countries did PPP hold? A multiple testing approach Empirical Economics 37: 93-103.
Haug AH. 1996. Tests for cointegration: a Monte Carlo comparison. Journal of Econometrics 71: 89-115.
Ho¤mann M. 2004. International capital mobility in the long run and the short run: Can westill learn from saving investment data? Journal of International Money and Finance 23: 113-131.
Jansen WJ. 1996. Estimating saving-investment correlations: evidence for OECD countries based on error correction model. Journal of International Money and Finance, 15: 749- 781.
Kao C. 1999. Spurious Regression and Residual-Based Tests for Cointegration in Panel Data. Journal of Econometrics, 90: 1-44. Kim SH. 2001. The saving-investment correlation puzzle is still a puzzle. Journal of International Money and Finance 20: 1017-1034.
Kim H, Oh K, Jeong C. 2005. Panel cointegration results on international capital mobility in asian economies. Journal of International Money and Finance 24: 71-82.
MacKinnon J. 1991. Critical Values for Cointegration Tests in Long-Run Economic Relation- ships, Engle RF, Granger C. (eds), Oxford University Press: Oxford (UK).
Ng S, Perron P. 1995. Unit Root Tests in ARMA Models with Data-Dependent Methods for the Selection of the Truncation Lag. Journal of the American Statistical Association, 90: 268-281.
Obstfeld M, Rogo¤K. 2000. The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? NBER Working Paper Series n. 7777.
Palm FC, Smeekes S, Urbain JP. 2008 Cross-Sectional Dependence Robust Block Bootstrap Panel Unit Root Tests METEOR Research Memoranda N. 48, Maastricht Research School of Economics of Technology and Organization.
Parker C, Paparoditis E. and Politis DN 2006 Unit root testing via the Stationary Bootstrap Journal of Econometrics 133: 601-638.
Paparoditis E, Politis DN 2001. The Continuous-Path Block Bootstrap In Asymptotics in Statistics and Probability. Papers in honor of George Roussas, Madan Puri (ed.), VSP Publications: Zeist (NL).
Paparoditis E, Politis, DN. 2003. Residual-based block bootstrap for unit root testing Econo- metrica 71: 813-855.
Pedroni P. 1999. Critical Values For Cointegration Tests In Heterogeneous Panels With Mul- tiple Regressors. Oxford Bulletin of Economics and Statistics 61: 653-670.
Pedroni P. 2004. Panel Cointegration, Asymptotic and Finite Sample Properties of Pooled Time Series tests with an Application to the PPP hypothesis. Econometric Theory 20: 597-625.
Pelgrin F, Schich S. 2008. International capital mobility: What do national saving-investment dynamics tell us? Journal of International Money and Finance 27: 331-344.
Pesaran HM. 2007. A Simple Panel Unit Root Test In The Presence Of Cross Section Depen- dence. Journal of Applied Econometrics 22: 265-312.
Pesaran HM, Shin Y, Smith RJ. 2001. Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics 16: 289-326.
Phillips PCB, Ouliaris S. 1990. Asympotic Properties of Residual Based Tests for Cointegra- tion. Econometrica 58: 165-93.
Moon HR, Phillips, PCB. 2000. Estimation Of Autoregressive Roots Near Unity Using Panel Data. Econometric Theory 16: 927-997.
Politis DN, Romano J.P. 1994. The Stationary Bootstrap. Journal of American Statististical Association 89: 1303-1313.
Savin NE. 1984. Multiple Hypothesis Testing. In Handbook of econometrics, vol. 2 ch. 14, Griliches Z Intriligator M (Eds), North-Holland: Amsterdam.
Smeekes S. 2010 Bootstrap Sequential Tests to Determine the Stationary Units in a Panel. Working Paper, Maastricht University.
Westerlund J. 2008 Panel Cointegration Tests of the Fisher E¤ect. Journal of Applied Econo- metrics 23: 193-233.
Westerlund J. Edgerton D. 2007. A Panel Bootstrap Cointegration Test Economics Letters 97: 185-190. 27