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Public and private saving and investment

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  • Eric van Wincoop
  • Jane Marrinan

Abstract

We decompose aggregate saving and investment into its public and private components and then document a variety of ``stylized facts'' associated with saving and investment rates for a sample of 15 countries over the period 1975--1989. In order to see whether these empirical relationships are consistent with a world of perfect capital mobility we develop a multi--country model with free trade in a riskfree bond and calibrate it to the fifteen OECD countries. We pay special attential to modeling the fiscal policy rules. The model performs remarkably well in accounting for a wide variety of time series relationships. Nonetheless the model is not able to capture the cross sectional aspect of the data. In particular, the model cannot account for both the large cross country correlation between aggregate saving and investment rates and the very negative cross country relationship between the public and private saving minus investment gaps.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/172.pdf
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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 172.

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Date of creation: Jun 1996
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Handle: RePEc:upf:upfgen:172

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Web page: http://www.econ.upf.edu/

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Keywords: Saving; investment; fiscal policy; current account;

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References

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  1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August.
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  9. Lawrence H. Summers, 1988. "Tax Policy and International Competitiveness," NBER Chapters, in: International Aspects of Fiscal Policies, pages 349-386 National Bureau of Economic Research, Inc.
  10. Baxter, M., 1992. "Financial Market Linkages and the International Transmission of Fiscal Policy," RCER Working Papers 336, University of Rochester - Center for Economic Research (RCER).
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  19. Morris Goldstein & Michael Mussa, 1993. "The Integration of World Capital Markets," IMF Working Papers 93/95, International Monetary Fund.
  20. Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12.
  21. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
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Cited by:
  1. Robert Kollmann, 1996. "Incomplete asset markets and the cross-country consumption correlation puzzle," ULB Institutional Repository 2013/7640, ULB -- Universite Libre de Bruxelles.
  2. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeiträge 69-98, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 09 Jul 2000.

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