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Crowding Out in Open Economies: Results from a Simulation Study

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  • Emanuela Cardia

Abstract

It has recently been shown that industrialized countries in the 1970s and 1980s are characterized by a high correlation between national saving and investment. This regularly is considered.puzzling in the context of highly integrated international capital markets. In this paper, the author shows that both the failure of real interest parity and productivity changes are each sufficient to generate a high positive correlation between national saving and investment. These results indicate that it is easier than previously thought to reproduce a high correlation between saving and investment in models with perfect capital mobility.

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  • Emanuela Cardia, 1992. "Crowding Out in Open Economies: Results from a Simulation Study," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 708-728, August.
    • Handle: RePEc:cje:issued:v:25:y:1992:i:3:p:708-28
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    Citations

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    Cited by:

    1. Maurice Obstfeld, 1993. "International Capital Mobility in the 1990s," NBER Working Papers 4534, National Bureau of Economic Research, Inc.
    2. AKITOBY, Bernardin, 1997. "Rigidité normale, dévaluation et équilibre général intertemporel," Cahiers de recherche 9708, Universite de Montreal, Departement de sciences economiques.
    3. Onur ÖZDEMIR, 2022. "High-Income Countries and Feldstein-Horioka Puzzle: Econometric Evidence from Dynamic Common-Correlated Effects Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 45-67, April.
    4. Pierdzioch, Christian & Doepke, Joerg & Buch, Claudia M., 2002. "Consumer preferences and the reliability of Euler equation tests of capital mobility: some simulation-based evidence," Kiel Working Papers 1131, Kiel Institute for the World Economy (IfW Kiel).
    5. Dilem Yıldırım & Onur A. Koska, 2018. "Puzzling out the Feldstein-Horioka Paradox for Turkey by a Time-Varying Parameter Approach," ERC Working Papers 1808, ERC - Economic Research Center, Middle East Technical University, revised Apr 2018.
    6. Senhadji, Abdelhak S., 1998. "Dynamics of the trade balance and the terms of trade in LDCs: The S-curve," Journal of International Economics, Elsevier, vol. 46(1), pages 105-131, October.
    7. Timur Han Gur & Lutfi Erden & Ibrahim Ozkan, 2011. "An Empirical Investigation on the Determinants of the Saving-Investment Interaction," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(3), pages 343-353, September.
    8. John B. Burbddge & William M. Scarth & Peter J. Stemp, 1994. "Saving, Investment and Current Account Dynamics," The Economic Record, The Economic Society of Australia, vol. 70(211), pages 397-407, December.
    9. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.

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