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Public and Private Saving and Investment

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Author Info
Eric van Wincoop
Jane Marrinan

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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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Publisher 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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Related research
Keywords: Saving; investment; fiscal policy; current account;

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Find related papers by JEL classification:
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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References listed on IDEAS
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. Michael Mussa & Morris Goldstein, 1993. "The integration of world capital markets," Proceedings, Federal Reserve Bank of Kansas City, pages 245-330.
  2. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September. [Downloadable!] (restricted)
  3. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March. [Downloadable!] (restricted)
  4. 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)
    Other versions:
  5. Martin Feldstein, 1982. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Working Papers 0947, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Canova, Fabio, 1993. "Sources and Propagation of International Business Cycles: Common Shocks or Transmission?," CEPR Discussion Papers 781, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. Lawrence H. Summers, 1989. "Tax Policy and International Competitiveness," NBER Working Papers 2007, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November. [Downloadable!] (restricted)
    Other versions:
  10. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Michael Mussa & Morris Goldstein, 1993. "The Integration of World Capital Markets," IMF Working Papers 93/95, International Monetary Fund.
  12. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June. [Downloadable!] (restricted)
    Other versions:
  13. Cardia, Emanuela, 1991. "The dynamics of a small open economy in response to monetary, fiscal, and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 411-434, December. [Downloadable!] (restricted)
  14. 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. [Downloadable!]
  15. Kollmann, R., 1993. "Fiscal Policy, Technology Shcks and the US Trade Balance Deficit," Cahiers de recherche 9313, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  16. Martin Feldstein & Philippe Bacchetta, 1992. "National Saving and International Investment," NBER Working Papers 3164, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Alan C. Stockman & Lars E.O. Svensson, 1987. "Capital Flows, Investment, and Exchange Rates," NBER Working Papers 1598, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  18. 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).
  19. 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. [Downloadable!] (restricted)
    Other versions:
  20. Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December. [Downloadable!] (restricted)
  21. Tobin, James, 1983. "'Domestic saving and international capital movements in the long run and the short run' by M. Feldstein," European Economic Review, Elsevier, vol. 21(1-2), pages 153-156. [Downloadable!] (restricted)
  22. Murphy, Robert G., 1984. "Capital mobility and the relationship between saving and investment rates in OECD countries," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 327-342, December. [Downloadable!] (restricted)
  23. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June. [Downloadable!] (restricted)
    Other versions:
  24. Borensztein, Eduardo R., 1989. "Fiscal policy and foreign debt," Journal of International Economics, Elsevier, vol. 26(1-2), pages 53-75, February. [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. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeitraege 69-98, Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 09 Jul 2000. [Downloadable!]
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