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Testing the Saving-Investment correlations in India: An evidence from single-equation and system estimators

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  • Singh, Tarlok

Abstract

This study tests the Saving-Investment correlations in India using both single-equation and system estimators. All the estimators suggest the cointegrating relationship between saving and investment, and the results are robust to the choice of estimator. The conventional and new CUSUM tests show long-run stability of equilibrium residuals and reinforce the cointegrating relationship between the model series. The slope parameter on saving is significantly different from zero, but not from one. These results support the FH hypothesis and suggest the imperfect mobility of capital and home-bias in the asset portfolio of domestic investors. The heavy reliance of investment on domestic saving also reinforces the 'Lucas Puzzle' on the lack of capital flows from the developed countries to the developing countries with scare capital and higher marginal product of capital.

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  • Singh, Tarlok, 2008. "Testing the Saving-Investment correlations in India: An evidence from single-equation and system estimators," Economic Modelling, Elsevier, vol. 25(5), pages 1064-1079, September.
  • Handle: RePEc:eee:ecmode:v:25:y:2008:i:5:p:1064-1079
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    4. Inder Sekhar Yadav & Phanindra Goyari & R. K. Mishra, 2018. "Saving, Investment and Growth in India: Evidence from Cointegration and Causality Tests," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 55-68, March.
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    6. Phiri, Andrew, 2017. "The Feldstein-Horioka puzzle and the global recession period: Evidence from South Africa using asymmetric cointegration analysis," MPRA Paper 79096, University Library of Munich, Germany.
    7. Solarin Sakiru Adebola & Jauhari Dahalan, 2012. "Capital Mobility: An Application of Savings-Investment Link for Tunisia," International Journal of Economics and Financial Issues, Econjournals, vol. 2(1), pages 1-11.

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