Abstract

In this paper, we examine domestic saving-investment relationship for a panel data of 40 countries consisting both industrial and emerging economies for the 1960-2013 period. To this end, we employ the recent advanced panel data estimation procedures which consider potential heterogeneity and cross-sectional dependency, to estimate short-run and long-run coefficients. We find that the correlation between saving and investment is higher in the long run than in the short run consistent with inter-temporal budget constraint. Furthermore, in contrast to the findings of previous studies, our results suggest smaller saving retention coefficient and thus higher capital mobility for industrial countries relative to developing economies.

Key words: Feldstein-Horioka Puzzle, Saving, Investment, Common Correlated Effects, Panel Data. JEL Classification: F32, C23

Article Language: EnglishTurkish