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Savings and Investments in the OECD: a panel cointegration study with a new bootstrap test

Author

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  • Francesca Di Iorio

    (Universita' di Napoli Federico II)

  • Stefano Fachin

    (Universita' di Roma "La Sapienza")

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. This test provides evidence of a long-run savings-investments relationship in about half of the OECD economies examined, including USA and Japan, but not Germany. The elasticities are however often smaller than 1, the value expected under no capital movements.

Suggested Citation

  • Francesca Di Iorio & Stefano Fachin, 2012. "Savings and Investments in the OECD: a panel cointegration study with a new bootstrap test," DSS Empirical Economics and Econometrics Working Papers Series 2012/2, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
    • Handle: RePEc:sas:wpaper:20122
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    8. Ketenci, Natalya, 2018. "Impact of the Global Financial Crisis on the Level of Capital Mobility in EU Members," MPRA Paper 100075, University Library of Munich, Germany.
    9. Andriansyah, Andriansyah & Messinis, George, 2019. "Stock Prices, Exchange Rates and Portfolio Equity Flows: A Toda-Yamamoto Panel Causality Test," MPRA Paper 97992, University Library of Munich, Germany.
    10. Francesca Di Iorio & Stefano Fachin, 2022. "Fiscal reaction functions for the advanced economies revisited," Empirical Economics, Springer, vol. 62(6), pages 2865-2891, June.
    11. Rajarshi Mitra, 2017. "Domestic Saving-Investment Correlation Puzzle Revisited: A Time Series Analysis for South Africa," Economics Bulletin, AccessEcon, vol. 37(2), pages 1217-1225.
    12. R. Golinelli & I. Mammi & A. Musolesi, 2018. "Parameter heterogeneity, persistence and cross-sectional dependence: new insights on fiscal policy reaction functions for the Euro area," Working Papers wp1120, Dipartimento Scienze Economiche, Universita' di Bologna.
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    More about this item

    Keywords

    Savings; Investments; Feldstein-Horioka puzzle; OECD; Panel Cointegration; Stationary Bootstrap.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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