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Savings and investment in Australia

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Author Info
Martin B. Schmidt

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Abstract

It has become popular to advocate tax reduction on the basis of promoting savings, investment and ultimately economic growth. The linkage between the variables is argued by various neoclassical growth models and is further suggested by recent studies which highlight the close association between domestic saving and investment rates. The close association may allow for polices which alter domestic saving levels in order to alter domestic investment levels. This interpretation, however, presumes an endogenous investment response. Equally likely, theoretically, is that the close association is maintained by movements in national savings. The present paper explicitly examines the endogeneity of the Australian saving and investment rates. The results highlight the exogeneity of investment. The results further suggest an endogenous response on the part of Australia's saving rate. The results may limit the potential benefits of these tax changes.

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Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 1 (January)
Pages: 99-106
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Handle: RePEc:taf:applec:v:35:y:2003:i:1:p:99-106

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References listed on IDEAS
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  3. Obstfeld, Maurice, 1986. "Capital mobility in the world economy: Theory and measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 55-103, January. [Downloadable!] (restricted)
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  4. Jos Jansen, W, 1996. "Estimating saving-investment correlations: evidence for OECD countries based on an error correction model," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 749-781, October. [Downloadable!] (restricted)
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  7. 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.
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  8. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June. [Downloadable!] (restricted)
  9. 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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  10. Crowder, William J, 1998. "The Long-Run Link between Money Growth and Inflation," Economic Inquiry, Oxford University Press, vol. 36(2), pages 229-43, April.
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  12. 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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  13. Philip M. Bodman, 1995. "National Savings And Domestic Investment In The Long Term: Some Time Series Evidence From The Oecd," International Economic Journal, Korean International Economic Association, vol. 9(2), pages 37-60, June. [Downloadable!] (restricted)
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  15. Miller, Stephen M., 1988. "Are saving and investment co-integrated?," Economics Letters, Elsevier, vol. 27(1), pages 31-34. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Saten Kumar & Scott Fargher & Don J. Webber, 2009. "Testing the validity of the Feldstein-Horioka puzzle for Australia," Discussion Papers 0911, University of the West of England, Department of Economics. [Downloadable!]
  2. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor and Francis Journals, vol. 37(17), pages 1979-1990, September. [Downloadable!] (restricted)
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