Public and Private Saving and Investment
AbstractSeveral have shown that models with perfect international capital mobility can generate high correlations between aggregate savings and investment, as observed in the data. In this paper we decompose aggregate saving and investment into their two component parts, private and public. This leads to some striking observations. In almost all of the OECD countries we investigate during the 1975-1989 period, the private sector saving investment gap closely mirrors the government sector saving investment gap. Moreover, unlike the large aggregate saving investment correlations, private sectors saving investment correlations are on average close to zero. The paper investigates these and other moments associated with the public and private saving and investment in the context of models with perfect capital mobility. The paper devotes significant attention to modeling the government sector. Rules for taxation, government consumption and investment are specified, estimated, and fed into the model simulations. We find that while models are fiscal, technology and interest rate shocks are able to generate negative correlations between the public and private sector saving investment gaps, these correlations still fall significantly short of the very negative correlations observed in the data. Moreover, The models are not able to generate correlations between private saving and investment that are much lower than those between total saving and investment.
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Bibliographic InfoPaper provided by Stockholm - International Economic Studies in its series Papers with number 546.
Length: 29 pages
Date of creation: 1993
Date of revision:
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Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.
Web page: http://www.iies.su.se/
More information through EDIRC
investments ; savings ; capital movements;
Other versions of this item:
- Jane Marrinan & Eric Van Wincoop, 1993. "Public And Private Savings And Investments," Boston College Working Papers in Economics 259, Boston College Department of Economics.
- Eric van Wincoop & Jane Marrinan, 1996. "Public and private saving and investment," Economics Working Papers 172, Department of Economics and Business, Universitat Pompeu Fabra.
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
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