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Country Size and Investment-Saving Correlation: A Panel Threshold Error Correction Model

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Author Info
Tsung-wu Ho () (Department of Economics, Shih Hsin University)
Ru-Lin Chiu (Shih Hsin University)
Abstract

The Feldstein-Horioka puzzle has caused by the substantial disagreement about the interpretation of the saving-retention coefficient. Baxter and Crucini (1993) propose a general equilibrium model to show that the investment-saving correlation will be large when the country-size, measured by GNP, is large. This paper evaluates this argument by examining the threshold effect of country-size on the saving-retention coefficients. Evidence from a panel of 24 OECD countries confirms this hypothesis.

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File URL: http://college.holycross.edu/eej/Volume27/V27N4P481_490.pdf
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Publisher Info
Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 27 (2001)
Issue (Month): 4 (Fall)
Pages: 481-490
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Handle: RePEc:eej:eeconj:v:27:y:2001:i:4:p:481-490

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Related research
Keywords: Investment; Saving;

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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  1. Martin Feldstein & Charles Horioka, 1980. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Tesar, Linda L., 1991. "Savings, investment and international capital flows," Journal of International Economics, Elsevier, vol. 31(1-2), pages 55-78, August. [Downloadable!] (restricted)
    Other versions:
  3. Husted, Steven, 1992. "The Emerging U.S. Current Account Deficit in the 1980s: A Cointegration Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 159-66, February. [Downloadable!] (restricted)
  4. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
    Other versions:
  5. Coiteux, Martin & Olivier, Simon, 2000. "The saving retention coefficient in the long run and in the short run: evidence from panel data," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 535-548, August. [Downloadable!] (restricted)
  6. Feldstein, Martin, 1983. "Domestic saving and international capital movements in the long run and the short run," European Economic Review, Elsevier, vol. 21(1-2), pages 129-151. [Downloadable!] (restricted)
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  7. Sachsida, Adolfo & Caetano, Marcelo Abi-Ramia, 2000. "The Feldstein-Horioka puzzle revisited," Economics Letters, Elsevier, vol. 68(1), pages 85-88, July. [Downloadable!] (restricted)
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  8. Jansen, W. Jos, 2000. "International capital mobility: evidence from panel data," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 507-511, August. [Downloadable!] (restricted)
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  9. Ghosh, Atish R, 1995. "International Capital Mobility amongst the Major Industrialised Countries: Too Little or Too Much?," Economic Journal, Royal Economic Society, vol. 105(428), pages 107-28, January. [Downloadable!] (restricted)
  10. Jansen, W Jos & Schulze, Gunther G, 1996. "Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway," Economic Inquiry, Oxford University Press, vol. 34(1), pages 116-32, January.
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  11. Murphy, Robert G., 1984. "Capital mobility and the relationship between saving and investment rates in OECD countries," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 327-342, December. [Downloadable!] (restricted)
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