Savings and investments in the OECD, 1970–2007: A test of panel cointegration with regime changes |
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| Institution: | 1. Dip. Political Science, University of Naples Federico II, Naples, Italy;2. Dip. Statistics, University of Rome “La Sapienza”, Rome, Italy;1. Department of Banking and Finance, National Chiayi University, No. 580, Sinmin Road, Chiayi City 60054, Taiwan;2. Department of Finance, National Yunlin University of Science & Technology, No. 123, University Road, Section 3, Douliou City 64002, Taiwan;3. Department of Wealth and Taxation Management, National Kaohsiung University of Applied Sciences, No. 415, Chien-Kung Road, Sanmin District, Kaohsiung City 80778, Taiwan;4. Graduate Institute of Finance, National Pingtung University of Science and Technology, No. 1, Hseuhfu Road, Neipu, Pingtung 91201, Taiwan;1. University of Louisiana at Lafayette, B.I. Moody III College of Business, Department of Economics & Finance, 214 Hebrard Boulevard, Moody Hall 253, P.O. Box 44570, Lafayette, LA 70504-4570, United States;2. Department of Economics, School of Business and Economics, Wilfrid Laurier University, 75 University Avenue West, Waterloo, ON N2L 3C5, Canada;1. University Grenoble Alpes, TIMA, F-38031 Grenoble, France CNRS, TIMA, F-38031 Grenoble, France;2. STMicroelectronics, Grenoble, France |
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| Abstract: | In this paper we test for the existence of a long-run relationship between investment and savings (the Feldstein–Horioka puzzle) in a panel of 18 OECD countries, 1970–2007, allowing for heterogenous breaks in the coefficients. For this purpose we develop a bootstrap panel cointegration with breaks robust to cross-section dependence, shown by simulation to enjoy good size and power properties provided that some care is applied in its use. The tests suggest that, even allowing for parameter shifts in the countries where capital control regulations changed in the sample period, there is no evidence of an investment–savings long-run relationship for the panel as a whole. |
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| Keywords: | Feldstein–Horioka puzzle Panel cointegration Stationary bootstrap Breaks OECD |
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