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Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway

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  • Jansen, W Jos
  • Schulze, Gunther G

Abstract

The work of Martin Feldstein and Charles Horioka (1980) has stimulated much research on the correlations of national savings and investment rates and their relation to the degree of international capital mobility. Theory implies a cointegrating relation between these variables, which suggests this correlation is measured best by an error-correction model. This model includes all previous specifications as special cases, which the authors show are potentially misspecified on theoretical grounds. Applied to Norway, their model outperforms prevailing specifications. The authors detect structural breaks and find that the correlation's time profile is consistent with other indicators of capital mobility. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Jansen, W Jos & Schulze, Gunther G, 1996. "Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 116-132, January.
    • Handle: RePEc:oup:ecinqu:v:34:y:1996:i:1:p:116-32
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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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