Public And Private Savings And Investments
Several have shown that models with perfect international capital mobility can generate high correlations between aggregate savings and investment, as observed in the data. In this paper we decompose aggregate saving and investment into their two component parts, private and public. This leads to some striking observations. In almost all of the OECD countries we investigate during the 1975-1989 period, the private sector saving investment gap closely mirrors the government sector saving investment gap. Moreover, unlike the large aggregate saving investment correlations, private sectors saving investment correlations are on average close to zero. The paper investigates these and other moments associated with the public and private saving and investment in the context of models with perfect capital mobility. The paper devotes significant attention to modeling the government sector. Rules for taxation, government consumption and investment are specified, estimated, and fed into the model simulations. We find that while models are fiscal, technology and interest rate shocks are able to generate negative correlations between the public and private sector saving investment gaps, these correlations still fall significantly short of the very negative correlations observed in the data. Moreover, The models are not able to generate correlations between private saving and investment that are much lower than those between total saving and investment.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Dec 1993|
|Date of revision:|
|Contact details of provider:|| Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA|
Web page: http://fmwww.bc.edu/EC/
More information through EDIRC
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.:
- Martin Feldstein & Philippe Bacchetta, 1991.
"National Saving and International Investment,"
in: National Saving and Economic Performance, pages 201-226
National Bureau of Economic Research, Inc.
- Morris Goldstein & Michael Mussa, 1993.
"The Integration of World Capital Markets,"
IMF Working Papers
93/95, International Monetary Fund.
- Michael Mussa & Morris Goldstein, 1993. "The integration of world capital markets," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 245-330.
- Baxter, M., 1992. "Financial Market Linkages and the International Transmission of Fiscal Policy," RCER Working Papers 336, University of Rochester - Center for Economic Research (RCER).
- Canova, Fabio, 1993. "Sources and Propagation of International Business Cycles: Common Shocks or Transmission?," CEPR Discussion Papers 781, C.E.P.R. Discussion Papers.
- 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.
- Martin Feldstein, 1991. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 331-353 National Bureau of Economic Research, Inc.
- Feldstein, Martin, 1983. "Domestic saving and international capital movements in the long run and the short run," European Economic Review, Elsevier, vol. 21(1-2), pages 129-151.
- Baxter, M. & Crucini, M.J., 1990.
"Explaining Saving/Investment Correlation,"
RCER Working Papers
224, University of Rochester - Center for Economic Research (RCER).
- Nouriel Roubini, 1988.
"Current Account and Budget Deficits in an Intertemporal Model of Consumption and Taxation Smoothing. A Solution to the "Feldstein-Horioka Puzzle"?,"
NBER Working Papers
2773, National Bureau of Economic Research, Inc.
- Roubini, N., 1989. "Current Account And Budget Deficits In An Intertemporal Model Of Consumption And Taxation Smoothing. A Solution To The "Feldstein-Horioka" Puzzel," Papers 569, Yale - Economic Growth Center.
- French, Kenneth R & Poterba, James M, 1991.
"Investor Diversification and International Equity Markets,"
American Economic Review,
American Economic Association, vol. 81(2), pages 222-26, May.
- Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
- Lawrence H. Summers, 1986.
"Tax Policy and International Competitiveness,"
NBER Working Papers
2007, National Bureau of Economic Research, Inc.
- Marianne Baxter & Mario J. Crucini, 1992.
"Business cycles and the asset structure of foreign trade,"
Discussion Paper / Institute for Empirical Macroeconomics
59, Federal Reserve Bank of Minneapolis.
- Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
- Baxter, M. & Crucini, M., 1991. "Business Cycles and the Asset Structure of Foreign Trade," RCER Working Papers 316, University of Rochester - Center for Economic Research (RCER).
- Marianne Baxter & Mario J. Crucini, 1994. "Business Cycles and the Asset Structure of Foreign Trade," NBER Working Papers 4975, National Bureau of Economic Research, Inc.
- Buiter, Willem H., 1984.
"Fiscal Policy in Open, Interdependent Economies,"
CEPR Discussion Papers
28, C.E.P.R. Discussion Papers.
- Borensztein, Eduardo R., 1989. "Fiscal policy and foreign debt," Journal of International Economics, Elsevier, vol. 26(1-2), pages 53-75, February.
- Stockman, Alan C. & Svensson, Lars E. O., 1987.
"Capital flows, investment, and exchange rates,"
Journal of Monetary Economics,
Elsevier, vol. 19(2), pages 171-201, March.
- Obstfeld, Maurice, 1986.
"Capital mobility in the world economy: Theory and measurement,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 24(1), pages 55-103, January.
- Maurice Obstfeld, 1985. "Capital Mobility in the World Economy: Theory and Measurement," NBER Working Papers 1692, National Bureau of Economic Research, Inc.
- Kollmann, R., 1993. "Fiscal Policy, Technology Shcks and the US Trade Balance Deficit," Cahiers de recherche 9313, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12.
- Martin Feldstein & Charles Horioka, 1979.
"Domestic Savings and International Capital Flows,"
NBER Working Papers
0310, National Bureau of Economic Research, Inc.
- Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
- 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.
- David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991.
"International real business cycles,"
146, Federal Reserve Bank of Minneapolis.
- Tobin, James, 1983. "'Domestic saving and international capital movements in the long run and the short run' by M. Feldstein," European Economic Review, Elsevier, vol. 21(1-2), pages 153-156.
- Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
- Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
- Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
- Cardia, Emanuela, 1991. "The dynamics of a small open economy in response to monetary, fiscal, and productivity shocks," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 411-434, December.
When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:259. 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: (Christopher F Baum)
If references are entirely missing, you can add them using this form.