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The Global Side of the Investment‐Saving Puzzle
Author(s) -
BYRNE JOSEPH P.,
FAZIO GIORGIO,
FIESS NORBERT
Publication year - 2009
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2009.00244.x
Subject(s) - investment (military) , economics , econometrics , positive correlation , monetary economics , correlation , macroeconomics , mathematics , medicine , geometry , politics , political science , law
In this paper, we reexamine the long‐standing and puzzling correlation between national saving 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 saving and investment. We also find that the global components in saving and investments commove, indicating that they react to shocks of a global nature.