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Testing for capital mobility: New evidence from a panel of G7 countries

  • Narayan, Paresh Kumar
  • Narayan, Seema

In this paper, we test the savings-investment relationship for the G7 countries. Upon applying the Gregory and Hansen [Gregory, A.W., Hansen, B.E., 1996. Residual-based tests for cointegration in models with regime shifts, J. Econ. 70, 99-126] residual-based structural break test for cointegration for each of the G7 countries, we did not find any evidence of a cointegrating relationship between savings and investment. Extending the analysis to a panel framework, we could not establish any evidence of panel cointegration. Taken together, our findings suggest that capital in these G7 countries is highly mobile since no long-term relationship exists between savings and investment.

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Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 24 (2010)
Issue (Month): 1 (January)
Pages: 15-23

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Handle: RePEc:eee:riibaf:v:24:y:2010:i:1:p:15-23
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