Saving-Investment-Current Accounts Dynamics, Financial Crisis And Economic Growth: Some Empirical Results

The purpose of this paper is to empirically determine whether the shocks of the 2008/2009 financial crisis affected saving-investment-current account dynamics and the degree of reliance on international capital mobility, and whether shifts in capital mobility were also associated with shifts in growth performance. We use data for 27 OECD countries over the 1998-2017 interval to examine this issue. We divide the period under study into two 10-year subperiods of 1998-2007 and 2008-2017. We also classify our sample of countries into three groups according to their average growth rates over the 2008-2017 subperiod. We estimate a dynamic random coefficients model over the two sub-periods as well as for the three groups of countries. Our period-wise results indicate that there has been a significant increase in the saving-investment correlation, implying less reliance on international capital mobility after the recent financial/economic crisis. Our group-wise results appear to suggest that the group of countries with less reliance on capital mobility before the financial crisis has achieved a relatively better growth performance over the 2008-2017 period, likely because they were better insulated from the spillover effects of contagion that followed the financial crisis.