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The Global Side of the Investment-Savings Puzzle

  • Byrne, Joseph P.
  • Fiess, Norbert
  • Fazio, Giorgio

In this paper we re-examine the long standing and puzzling correlation between national savings and investment in industrial countries. We apply an econometric methodology that allows us to separate idiosyncratic correlation at the country level from correlation at the global level. In a major break with the existing literature, we find no evidence of a long run relationship in the idiosyncratic components of savings and investment. We also find that the global components in savings and investments comove, indicating that they react to shocks of a global nature.

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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2008-22.

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Date of creation: 2008
Date of revision:
Handle: RePEc:edn:sirdps:35
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