TY - JOUR
T1 - Asymmetries exist in the Feldstein-Horioka relationship
AU - Raza, Hamid
AU - Zoega, Gylfi
AU - Kinsella, Stephen
PY - 2018
Y1 - 2018
N2 - Most studies assume symmetry between saving and investment changes. They are wrong to do so. We model the response of investment to positive and negative changes in saving for 17 OECD countries from 1960 to 2015. We use both panel and time series methods. We find that negative changes in saving have a stronger effect on investment than positive changes in saving do. In the short run, causality only runs from negative changes in saving to investment. In the long run, both negative and positive changes in saving Granger cause investment. Models relying on saving-investment symmetry in the long run are called into question. Policies assuming symmetric effects throughout the business cycle are similarly flawed.
AB - Most studies assume symmetry between saving and investment changes. They are wrong to do so. We model the response of investment to positive and negative changes in saving for 17 OECD countries from 1960 to 2015. We use both panel and time series methods. We find that negative changes in saving have a stronger effect on investment than positive changes in saving do. In the short run, causality only runs from negative changes in saving to investment. In the long run, both negative and positive changes in saving Granger cause investment. Models relying on saving-investment symmetry in the long run are called into question. Policies assuming symmetric effects throughout the business cycle are similarly flawed.
UR - http://www.scopus.com/inward/record.url?scp=85039735142&partnerID=8YFLogxK
U2 - 10.1080/09638199.2017.1418412
DO - 10.1080/09638199.2017.1418412
M3 - Journal article
SN - 0963-8199
VL - 27
SP - 667
EP - 684
JO - The Journal of International Trade & Economic Development
JF - The Journal of International Trade & Economic Development
IS - 6
ER -