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The Relationship between National Saving and Investment in Latin America and the Caribbean

Author

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  • Eduardo Cavallo

    ()

  • Mathieu Pedemonte

    ()

Abstract

Using panel cointegration techniques and a comprehensive data set covering the period 1980–2013, this paper nds a positive and signi cant correlation between national saving and domestic investment rates in Latin America and the Caribbean. The estimated correlation is approximately 0.39; that is, for every one percentage point of GDP increase in national saving, domestic investment increases by 0.39 percentage points, on average. There are, however, three nuances to the headline result: (i) the estimated correlation has been declining over time; (ii) the regional average hides a large degree of intraregional heterogeneity; and (iii) the estimated coef- cient is largest among the biggest economies in the region. Low national saving rates remain a binding constraint for capital accumulation in Latin America and the Caribbean.

Suggested Citation

  • Eduardo Cavallo & Mathieu Pedemonte, 2016. "The Relationship between National Saving and Investment in Latin America and the Caribbean," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 29-53, April.
  • Handle: RePEc:col:000425:014409
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    Cited by:

    1. Duy-Tung Bui, 2018. "Fiscal policy and national saving in emerging Asia: challenge or opportunity?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 305-322, August.
    2. William B.P. Robson, 2017. "Enduring Virtues: Saving and Investing as National Priorities in 2017," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 467, January.

    More about this item

    Keywords

    Saving; Investment; Feldstein-Horioka puzzle; Panel cointegration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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