IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Re-examining the saving-investment nexus: threshold cointegration and causality evidence from the ECOWAS

  • Loesse Esso

    ()

The aim of this paper is to re-examine the relationship between saving and investment in the case of ECOWAS countries. We then employ the Gregory and Hansen (J Econometr 70:99–126, 1996a ; Oxford Bull Econ Stat 58:555–560, 1996b ) threshold cointegration tests and the Toda and Yamamoto (J Econometr 66:225–250, 1995 ) causality procedure. Threshold cointegration approach allows estimating changes in the saving-retention coefficients over time. Using yearly data for the period from 1960 to 2007, we show out two groups of countries regarding the cointegration test results. In the first group (The Gambia and Togo), capital is perfectly mobile since there is no long-run relationship between savings and investment. The second group comprised of the ten other ECOWAS countries studied, is characterized by an incomplete capital mobility. Moreover, in the second group the saving-retention coefficient is time-varying in most of the ECOWAS countries (except for Benin and Niger) and is different from a country to another one. The changes in the saving-retention coefficients indicate how international capital mobility has changed. Moreover, the inclusion of trade openness and country size in the saving-investment equation reduces the saving retention coefficients implying improvement of capital mobility over time. Furthermore, investment rates cause saving rates in Benin, Guinea-Bissau and Niger while saving rates cause investment rates in Cote d’Ivoire, Nigeria and Sierra Leone. Copyright Springer Science+Business Media, LLC. 2012

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1007/s10644-011-9115-y
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Economic Change and Restructuring.

Volume (Year): 45 (2012)
Issue (Month): 3 (August)
Pages: 193-220

as
in new window

Handle: RePEc:kap:ecopln:v:45:y:2012:i:3:p:193-220
DOI: 10.1007/s10644-011-9115-y
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/development/journal/10644/PS2

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
  2. Christophe Hurlin, 2007. "The Feldstein-Horioka Puzzle: a Panel Smooth Transition Regression Approach," Post-Print halshs-00270213, HAL.
  3. Payne, James E., 2005. "Savings-investment dynamics in Mexico," Journal of Policy Modeling, Elsevier, vol. 27(5), pages 525-534, July.
  4. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-76, April.
  5. Augustin Kwasi Fosu & Mwangi S. Kimenyi & Njuguna S. Ndung'u, 2003. "Economic Reforms and Restructuring in Sub-Saharan Africa: An Overview," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(Supplemen), pages 1-11, September.
  6. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
  7. Perron, P., 1989. "Testing For A Unit Root In A Time Series With A Changing Mean," Papers 347, Princeton, Department of Economics - Econometric Research Program.
  8. Reinhart, Carmen & Tokatlidis, Ioannis, 2000. "Financial Liberalization: The African Experience," MPRA Paper 13423, University Library of Munich, Germany.
  9. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  10. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  11. Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
  12. Yamada, Hiroshi, 1998. "A note on the causality between export and productivity:: an empirical re-examination," Economics Letters, Elsevier, vol. 61(1), pages 111-114, October.
  13. Falk, Barry L. & Enders, Walter, 1998. "Threshold-Autoregressive, Median-Unbiased, and Cointegration Tests of Purchasing Power Parity," Staff General Research Papers Archive 1221, Iowa State University, Department of Economics.
  14. Julien Fouquau, 2007. "The Feldstein-Horiaka Puzzle: a Panel Smooth Transition Regression Approach," Post-Print halshs-00222938, HAL.
  15. Taylor, Alan M, 2001. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," Econometrica, Econometric Society, vol. 69(2), pages 473-98, March.
  16. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  17. Alberto Bagnai, 2006. "Structural breaks and the twin deficits hypothesis," International Economics and Economic Policy, Springer, vol. 3(2), pages 137-155, November.
  18. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
  19. Keun-Yeob Oh & Bong-Han Kim & Hong-Kee Kim & Byung-Chul Ahn, 1999. "Savings-investment cointegration in panel data," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 477-480.
  20. Balke, Nathan S. & Fomby, Thomas B., 1992. "Threshold cointegration," Working Papers 9209, Federal Reserve Bank of Dallas.
    • Balke, Nathan S & Fomby, Thomas B, 1997. "Threshold Cointegration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
  21. Enders, Walter & Granger, C. W. J., 1998. "Unit Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Staff General Research Papers Archive 1388, Iowa State University, Department of Economics.
  22. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-60, August.
  23. Coakley, Jerry & Kulasi, Farida & Smith, Ron, 1996. "Current Account Solvency and the Feldstein-Horioka Puzzle," Economic Journal, Royal Economic Society, vol. 106(436), pages 620-27, May.
  24. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
  25. Andrade, Philippe & Bruneau, Catherine & Gregoir, Stephane, 2005. "Testing for the cointegration rank when some cointegrating directions are changing," Journal of Econometrics, Elsevier, vol. 124(2), pages 269-310, February.
  26. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  27. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
  28. Evans, Paul & Kim, Bong-Han & Oh, Keun-Yeob, 2008. "Capital mobility in saving and investment: A time-varying coefficients approach," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 806-815, September.
  29. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  30. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  31. Nell, Kevin S. & Santos, Luis Delfim, 2008. "The Feldstein-Horioka hypothesis versus the long-run solvency constraint model: A critical assessment," Economics Letters, Elsevier, vol. 98(1), pages 66-70, January.
  32. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
  33. Jérôme Hericourt & Mathilde Maurel, 2000. "The Feldstein-Horioka Puzzle Revisited: An “European-Regional” Perspective," William Davidson Institute Working Papers Series wp763, William Davidson Institute at the University of Michigan.
  34. Bangake, Chrysost & Eggoh, Jude C., 2011. "The Feldstein-Horioka puzzle in African countries: A panel cointegration analysis," Economic Modelling, Elsevier, vol. 28(3), pages 939-947, May.
  35. Adolfo Sachsida & Marcelo Abi-Ramia Caetano, 1999. "The Feldstein-Horioka Puzzle Revisited," International Trade 9904001, EconWPA.
  36. Kim, Sunghyun Henry, 2001. "The saving-investment correlation puzzle is still a puzzle," Journal of International Money and Finance, Elsevier, vol. 20(7), pages 1017-1034, December.
  37. Mamingi, Nlandu, 1997. "Saving-investment correlations and capital mobility: The experience of developing countries," Journal of Policy Modeling, Elsevier, vol. 19(6), pages 605-626, December.
  38. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June.
  39. Eslamloueyan, Karim & Jafari, Mahbobeh, 2010. "Capital mobility, openness, and saving-investment relationship in Asia," Economic Modelling, Elsevier, vol. 27(5), pages 1246-1252, September.
  40. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  41. Lo, Ming Chien & Zivot, Eric, 2001. "Threshold Cointegration And Nonlinear Adjustment To The Law Of One Price," Macroeconomic Dynamics, Cambridge University Press, vol. 5(04), pages 533-576, September.
  42. Chakrabarti, Avik, 2006. "The saving-investment relationship revisited: New evidence from multivariate heterogeneous panel cointegration analyses," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 402-419, June.
  43. Miller, Stephen M., 1988. "Are saving and investment co-integrated?," Economics Letters, Elsevier, vol. 27(1), pages 31-34.
  44. Georgopoulos, George J. & Hejazi, Walid, 2005. "Feldstein-Horioka meets a time trend," Economics Letters, Elsevier, vol. 86(3), pages 353-357, March.
  45. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
  46. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  47. Coakley, Jerry & Kulasi, Farida, 1997. "Cointegration of long span saving and investment," Economics Letters, Elsevier, vol. 54(1), pages 1-6, January.
  48. Wu, Jyh-lin, 1998. "Are budget deficits "too large"?: The evidence from Taiwan," Journal of Asian Economics, Elsevier, vol. 9(3), pages 519-528.
  49. Bencivenga, V.R. & Smith, B.D., 1988. "Financial Intermediation And Endogenous Growth," RCER Working Papers 124, University of Rochester - Center for Economic Research (RCER).
  50. Mohitosh Kejriwal & Pierre Perron, 2006. "Unit Root Tests Allowing for a Break in the Trend Function at an Unknown Time Under Both the Null and Alternative Hypotheses," Boston University - Department of Economics - Working Papers Series WP2006-052, Boston University - Department of Economics.
  51. James Payne & Risa Kumazawa, 2005. "Capital mobility, foreign aid, and openness: further panel data evidence from sub-Saharan Africa," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(1), pages 122-126, March.
  52. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  53. Kollias, Christos & Mylonidis, Nikolaos & Paleologou, Suzanna-Maria, 2008. "The Feldstein-Horioka puzzle across EU members: Evidence from the ARDL bounds approach and panel data," International Review of Economics & Finance, Elsevier, vol. 17(3), pages 380-387.
  54. Telatar, Erdinc & Telatar, Funda & Bolatoglu, Nasip, 2007. "A regime switching approach to the Feldstein-Horioka puzzle: Evidence from some European countries," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 523-533.
  55. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-50, July.
  56. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.
  57. Wong, David Y., 1990. "What do saving-investment relationships tell us about capital mobility?," Journal of International Money and Finance, Elsevier, vol. 9(1), pages 60-74, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:ecopln:v:45:y:2012:i:3:p:193-220. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Rebekah McClure)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.