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What Do Productivity Shocks Tell Us About the Saving-Investment Relationship?

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  • Lutfi Erden
  • Ibrahim Ozkan
  • Burak Gunalp

Abstract

This study is a contribution to the empirical literature on the significance of productivity shocks in explaining a high saving-investment correlation, using data from a panel of 21 OECD countries over the period 1970-2003. The study looks at the distributional properties of the productivity shocks in order to test if productivity shocks can relate saving to investment. To this end, we divide the countries into three groups with respect to the distributional characteristics of productivity shocks in each country with an application of the Fuzzy-c-means (FCM) clustering technique. The results provide some support for the productivity shock argument, indicating that the saving retention coefficients are greater for the countries subject to large productivity shocks in magnitude.

Suggested Citation

  • Lutfi Erden & Ibrahim Ozkan & Burak Gunalp, 2009. "What Do Productivity Shocks Tell Us About the Saving-Investment Relationship?," Prague Economic Papers, Prague University of Economics and Business, vol. 2009(3), pages 195-208.
    • Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:3:id:349:p:195-208
    DOI: 10.18267/j.pep.349
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    Cited by:

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    More about this item

    Keywords

    Feldstein-Horioka Puzzle; Productivity Shocks; Fuzzy Clustering; International Capital Mobility; Kolmogorov-Smirnov Statistics;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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