Savings and Investments in the OECD, 1970-2007: a Panel Cointegration test with breaks

Di Iorio, Francesca and Fachin, Stefano (2010): Savings and Investments in the OECD, 1970-2007: a Panel Cointegration test with breaks.

Abstract

In this paper we test for the existence of a long-run relationship between investment and savings (the Feldstein-Horioka puzzle) in a panel of 18 OECD countries, 1970-2007, allowing for het- erogenous breaks in the coe¢ cients. For this purpose we develop a bootstrap panel cointegration test with breaks robust to cross-section dependence. The test suggests that, even allowing for breaks in the countries where capital control regulations changed in the sample period, there is no evidence of an investment-savings long-run relationship for the panel as a whole.

• Item Type: MPRA Paper
• Institution: University of Rome ”La Sapienza”
• Language: English
• Keywords: Feldstein-Horioka Puzzle, Investment, Savings, Panel cointegration, stationary boot- strap, breaks, OECD.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models

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