Abstract
Saving-investment correlations are important stylized facts in open economy macroeconomics and indicators of capital mobility. They are best estimated by an Error Correction Model (ECM), because an ECM is consistent with intertemporal general equilibrium models. The ECM is a synthesis of previous approaches. Applying the ECM to the OECD countries, we find that in general saving and investment are cointegrated. The ECM is more powerful in detecting cointegration than the two-step Engle-Granger procedure. Estimates of the saving-investment correlation are robust with respect to overdifferencing We find evidence of a large country effect and an increase in capital mobility within the OECD area.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
