Savings and investments in the OECD: a panel cointegration study with a new bootstrap test |
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Authors: | Francesca Di Iorio Stefano Fachin |
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Institution: | 1. University of Naples Federico II, Naples, Italy 2. University of Rome “La Sapienza”, Rome, Italy
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Abstract: | In this paper we test for the existence of a stable 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 most of the countries, with USA the most notable exception. However, the elasticities generally smaller than 1 suggest that market imperfections mostly cause only partial home biases. |
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