Savings and Investment Correlations in Response to Monetary Policy Shocks: New Insights into the Feldstein-Horioka Puzzle?
AbstractIn this paper, it is argued that the observed high positive correlation between national savings and investment which is found in the data can in part be explained by shocks to monetary policy. This hypothesis, which is established by reviewing some empirical findings, is tested in a two-country DSGE-model framework in the tradition of the New Open Economy Macroeconomics. The simulation results obtained support the idea that shocks to monetary policy might contribute to the explanation of the Feldstein-Horioka puzzle.
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Bibliographic InfoPaper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 06-144.
Length: 42 pages
Date of creation: Aug 2006
Date of revision:
Savings Investment Correlations; Monetary Policy Shocks; Feldstein- Horioka Puzzle; Local-currency pricing;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-03 (All new papers)
- NEP-CBA-2007-02-03 (Central Banking)
- NEP-DGE-2007-02-03 (Dynamic General Equilibrium)
- NEP-MAC-2007-02-03 (Macroeconomics)
- NEP-MON-2007-02-03 (Monetary Economics)
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