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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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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. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
  9. Florian Pelgrin & Sebastian Schich, 2004. "National Saving-Investment Dynamics and International Capital Mobility," Working Papers 04-14, Bank of Canada.
  10. Ron Smith & Ana-Maria Fuertes & Jerry Coakley, 2001. "Small Sample Properties of Panel Time-series Estimators with I(1) Errors," Working Papers wp01-08, Warwick Business School, Finance Group.
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  18. Miller, Stephen M., 1988. "Are saving and investment co-integrated?," Economics Letters, Elsevier, vol. 27(1), pages 31-34.
  19. 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.
  20. Alexakis, Panayotis & Apergis, Nicholas, 1994. "The Feldstein-Horioka puzzle and exchange rate regimes: Evidence from cointegration tests," Journal of Policy Modeling, Elsevier, vol. 16(5), pages 459-472, October.
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