A Panel Cointegration study of the long-run relationship between Savings and Investments in the OECD economies, 1970-2007

Francesca Di Iorio · Stefano Fachin

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Abstract

In this paper we test for the existence of a long-run savings-investments relationship in 18OECD economies over the period 1970-2007. Although individual modelling provides only veryweak support to the hypothesis of a link between savings and investments, this cannot be ruledout as individual time series tests may have low power. We thus construct a new bootstrap testfor panel cointegration robust to short- and long-run dependence across units. This testprovides evidence of a long-run savings-investments relationship in about half of the OECDeconomies examined. The elasticities are however often smaller than 1, the value expectedunder no capital movements.

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References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 2001Bounds testing approaches to the analysis of level relationships 2007A simple panel unit root test in the presence of cross‐section dependence 1999Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors 2004PANEL COINTEGRATION: ASYMPTOTIC AND FINITE SAMPLE PROPERTIES OF POOLED TIME SERIES TESTS WITH AN APPLICATION TO THE PPP HYPOTHESIS 1999Spurious regression and residual-based tests for cointegration in panel data 1980Domestic Saving and International Capital Flows 1998Error‐correction Mechanism Tests for Cointegration in a Single‐equation Framework

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2015What is the Relationship between National Saving and Investment in Latin America and the Caribbean?2016The Relationship between National Saving and Investment in Latin America and the Caribbean

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