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Panel data model comparison for empirical saving-investment relations

  • Herwartz, Helmut
  • Xu, Fang
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The low capital mobility among OECD countries, signalled by a high saving-investment (SI) relation and known as the Feldstein-Horioka puzzle, has triggered a lively discussion in the empirical literature. In this paper, we compare between, pooled, time and country dependent specifications of the SI relation via cross-validation criteria. It is found that the country dependent model is best performing among the four. Secondly, error correction models are uniformly outperformed by static panel models. Thirdly, via scatter diagrams of cross section specific estimates we observe a different time evolution of SI relations for developed and developing economies.

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File URL: http://econstor.eu/bitstream/10419/22011/1/EWP-2006-06.pdf
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Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2006,06.

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Date of creation: 2006
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Handle: RePEc:zbw:cauewp:4350
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  8. Coakley, Jerry & Kulasi, Farida, 1997. "Cointegration of long span saving and investment," Economics Letters, Elsevier, vol. 54(1), pages 1-6, January.
  9. 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.
  10. Jerry Coakley & Ana-Maria Fuertes & Fabio Spagnolo, 2004. "The Feldstein-Horioka puzzle is not as bad as you think," Money Macro and Finance (MMF) Research Group Conference 2003 17, Money Macro and Finance Research Group.
  11. Afxentiou, Panos & Serletis, Apostolos, 1993. "International Capital Mobility and the Long-Run Investrnent and Saving in Canada," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 46(2-3), pages 147-167.
  12. Miller, Stephen M., 1988. "Are saving and investment co-integrated?," Economics Letters, Elsevier, vol. 27(1), pages 31-34.
  13. 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.
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  16. Herwartz, Helmut & Xu, Fang, 2006. "Reviewing the sustainability/stationarity of current account imbalances with tests for bounded integration," Economics Working Papers 2006,07, Christian-Albrechts-University of Kiel, Department of Economics.
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