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Public and private saving and investment

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  • Eric van Wincoop
  • Jane Marrinan

Abstract

We decompose aggregate saving and investment into its public and private components and then document a variety of ``stylized facts'' associated with saving and investment rates for a sample of 15 countries over the period 1975--1989. In order to see whether these empirical relationships are consistent with a world of perfect capital mobility we develop a multi--country model with free trade in a riskfree bond and calibrate it to the fifteen OECD countries. We pay special attential to modeling the fiscal policy rules. The model performs remarkably well in accounting for a wide variety of time series relationships. Nonetheless the model is not able to capture the cross sectional aspect of the data. In particular, the model cannot account for both the large cross country correlation between aggregate saving and investment rates and the very negative cross country relationship between the public and private saving minus investment gaps.

Suggested Citation

  • Eric van Wincoop & Jane Marrinan, 1996. "Public and private saving and investment," Economics Working Papers 172, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:172
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    Cited by:

    1. Kollmann, R., 1996. "The Exchange rate in a Dynamic-Optimizing Current Account Model with Nominal Rigidities : A Quantitative Investigation," Other publications TiSEM c9241581-7b87-4f50-ab98-a, Tilburg University, School of Economics and Management.
    2. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeiträge 69-98, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 2000.
    3. Peeters, Marga, 1999. "The Public-Private Savings Mirror and Causality Relations Among Private Savings, Investment, and (twin) Deficits: A Full Modeling Approach," Journal of Policy Modeling, Elsevier, vol. 21(5), pages 579-605, September.
    4. Fabio Canova & Jane Marrinan, 1996. "Sources and propagation of international cycles: Common shocks or transmission?," Economics Working Papers 188, Department of Economics and Business, Universitat Pompeu Fabra.
    5. Marrinan, Jane, 1998. "Government consumption and private consumption correlations," Journal of International Money and Finance, Elsevier, vol. 17(4), pages 615-636, August.
    6. Hess, Gregory D. & Shin, Kwanho, 1998. "Intranational business cycles in the United States," Journal of International Economics, Elsevier, vol. 44(2), pages 289-313, April.
    7. Anthony Birchwood & Rudolph Matthias, 2007. "Structural factors associated with primary fiscal balances in developing countries," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1235-1243.
    8. Tesar, Linda L., 1995. "Evaluating the gains from international risksharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 95-143, June.
    9. Kollmann, Robert, 1996. "Incomplete asset markets and the cross-country consumption correlation puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 945-961, May.

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    More about this item

    Keywords

    Saving; investment; fiscal policy; current account;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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