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Panel data model comparison for empirical saving-investment relations

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Author Info
Herwartz, Helmut
Xu, Fang

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Abstract

The low capital mobility among OECD countries, signalled by a high saving-investment (SI) relation and known as the Feldstein-Horioka puzzle, has triggered a lively discussion in the empirical literature. In this paper, we compare between, pooled, time and country dependent specifications of the SI relation via cross-validation criteria. It is found that the country dependent model is best performing among the four. Secondly, error correction models are uniformly outperformed by static panel models. Thirdly, via scatter diagrams of cross section specific estimates we observe a different time evolution of SI relations for developed and developing economies. --

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Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2006,06.

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Date of creation: 2006
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Handle: RePEc:zbw:cauewp:4350

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Web page: http://www.wiso.uni-kiel.de/econ/

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Related research
Keywords: Saving-investment relation; Feldstein-Horioka puzzle; model comparison;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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    Other versions:
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    Other versions:
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    Other versions:
  5. Jerry Coakley, Ana-Maria Fuertes, Ron Smith, 2001. "Small sample properties of panel time-series estimators with I(1) errors," Computing in Economics and Finance 2001 191, Society for Computational Economics.
    Other versions:
  6. Cavaliere, Giuseppe, 2005. "Limited Time Series With A Unit Root," Econometric Theory, Cambridge University Press, vol. 21(05), pages 907-945, October. [Downloadable!]
    Other versions:
  7. Herwartz, Helmut & Xu, Fang, 2006. "Reviewing the sustainability/stationarity of current account imbalances with tests for bounded integration," Economics Working Papers 2006,07, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
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  19. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2002-2), pages 147-210. [Downloadable!]
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  1. Rao, B. Bhaskara & Tamazian, Artur & Kumar, Saten, 2009. "Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks," MPRA Paper 15312, University Library of Munich, Germany. [Downloadable!]
  2. Kumar, Saten & Rao, B. Bhaskara, 2009. "A Time Series Approach to the Feldstein-Horioka Puzzle with Panel Data from the OECD Countries," MPRA Paper 18464, University Library of Munich, Germany. [Downloadable!]
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