The role of savings rate in exchange rate and trade imbalance nexus: Cross-countries evidence |
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| Institution: | 1. School of Business Administration, Southwestern University of Finance and Economics, Chengdu, 611130, China;2. Department of Economics, National Chung Cheng University, Minhsiung, 62102 Chiayi, Taiwan;1. University of Saskatchewan, Canada;2. Bank of Canada, Canada;1. University of São Paulo, School of Economics, Business Administration and Accounting at Ribeirão Preto, Department of Accounting, Brazil;2. University of São Paulo, School of Engineering of São Carlos, Department of Production Engineering, Brazil;1. Department of International Business, Southern Taiwan University of Science and Technology, No. 1, Nantai Street, Yukung Dist., Tainan 71005, Taiwan;2. Department of Business Administration, Da-Yeh University, No. 168, University Rd., Dacun, Changhua 51591, Taiwan;1. Université de Lorraine, 34 cours Léopold CS 25233, 54052 Nancy Cedex, France;2. BETA-CNRS, France;3. INRA, UMR356, France;4. AgroParisTech, Engref, LEF, France;5. Sciences Po Lyon, 14 avenue Berthelot, 69365 LYON Cedex 07, France;6. LET UMR CNRS 5593, France;7. IXXI — “Complex Systems Institute” — ENS Lyon, France |
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| Abstract: | Will a higher savings rate improve a country's trade imbalance? Using data for 76 countries for the period 1975–2010, we examine the relationship between trade balance, savings rate, and real exchange rate. To address the potential non-linear effects of the savings rate, we use the panel smooth transition regression (PSTR) model with instrumental variables. Our results indicate that countries with a savings rate above the threshold of 14.8% can improve their trade balance by increasing the savings rate or depreciating their currency. Even though the sample is divided into two groups on the basis of income level, the empirical results vary little, suggesting that our findings are robust to the data separation. |
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