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Saving-Investment Correlation and Capital Flows: The Philippines 1960-2014

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  • Rajarshi Mitra

    (Higher School of Economics)

Abstract

With greater financial liberalization, the intrinsic link between domestic saving-investment correlation and international capital mobility is gaining increasing importance. Notwithstanding the enormous extent and significance of recent empirical investigations of this relationship from the standpoint of economic and financial policies, including efforts to explain the large variations in results observed across different countries, study periods and econometric methodologies, the Feldstein and Horioka (1980) study of domestic saving-investment correlation as an indicant of financial integration remains a core puzzle in international macroeconomic literature. This paper estimates a VECM and investigates the short-run and the long-run domestic saving-investment relationship for the Philippines. The sample period is 1960-2014. Cointegration analysis shows lack of a significant long-run relationship between domestic saving and investment-rates. Results, therefore, indicate limited effectiveness of saving policies in enhancing domestic investment in the Philippines for the period under study.

Suggested Citation

  • Rajarshi Mitra, 2015. "Saving-Investment Correlation and Capital Flows: The Philippines 1960-2014," Economics Bulletin, AccessEcon, vol. 35(4), pages 2853-2861.
    • Handle: RePEc:ebl:ecbull:eb-15-00641
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    References listed on IDEAS

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    More about this item

    Keywords

    Savings; Investment; Cointegration; Unit Root; VECM; Granger Causality.;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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