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Country Size and Investment-Saving Correlation: A Panel Threshold Error Correction Model

  • Tsung-wu Ho

    ()

    (Department of Economics, Shih Hsin University)

  • Ru-Lin Chiu

    (Shih Hsin University)

Registered author(s):

    The Feldstein-Horioka puzzle has caused by the substantial disagreement about the interpretation of the saving-retention coefficient. Baxter and Crucini (1993) propose a general equilibrium model to show that the investment-saving correlation will be large when the country-size, measured by GNP, is large. This paper evaluates this argument by examining the threshold effect of country-size on the saving-retention coefficients. Evidence from a panel of 24 OECD countries confirms this hypothesis.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume27/V27N4P481_490.pdf
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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 27 (2001)
    Issue (Month): 4 (Fall)
    Pages: 481-490

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    Handle: RePEc:eej:eeconj:v:27:y:2001:i:4:p:481-490
    Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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    Web page: http://www.ramapo.edu/eea/journal.html
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    1. 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.
    2. Alessandro Penati & Michael Dooley, 1984. "Current Account Imbalances and Capital Formation in Industrial Countries, 1949-81 (Déséquilibres des transactions courantes et formation de capital dans les pays industrialisés, 1949-81) (Los deseq," IMF Staff Papers, Palgrave Macmillan, vol. 31(1), pages 1-24, March.
    3. Tesar, Linda L., 1991. "Savings, investment and international capital flows," Journal of International Economics, Elsevier, vol. 31(1-2), pages 55-78, August.
    4. 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.
    5. Coiteux, Martin & Olivier, Simon, 2000. "The saving retention coefficient in the long run and in the short run: evidence from panel data," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 535-548, August.
    6. W. Jos Jansen, 2003. "International Capital Mobility: Evidence from Panel Data," International Finance 0310003, EconWPA.
    7. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
    8. Husted, Steven, 1992. "The Emerging U.S. Current Account Deficit in the 1980s: A Cointegration Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 159-66, February.
    9. Ghosh, Atish R, 1995. "International Capital Mobility amongst the Major Industrialised Countries: Too Little or Too Much?," Economic Journal, Royal Economic Society, vol. 105(428), pages 107-28, January.
    10. Sachsida, Adolfo & Caetano, Marcelo Abi-Ramia, 2000. "The Feldstein-Horioka puzzle revisited," Economics Letters, Elsevier, vol. 68(1), pages 85-88, July.
    11. Jansen, W.J. & Schulze, G.G., 1993. "Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway," Papers 9302-g, Erasmus University of Rotterdam - Institute for Economic Research.
    12. Jeroen J.M. Kremers & Neil R. Ericsson & Juan J. Dolado, 1992. "The power of cointegration tests," International Finance Discussion Papers 431, Board of Governors of the Federal Reserve System (U.S.).
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