A Panel Cointegration study of the long-run relationship between Savings and Investments in the OECD economies, 1970-2007

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.

Abstract

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
• Language: English
• 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

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