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The Global Side of the Investment-Saving Puzzle

Joseph P. Byrne, Giorgio Fazio and Norbert Fiess
Journal of Money, Credit and Banking
Vol. 41, No. 5 (Aug., 2009), pp. 1033-1040
Published by: Wiley
Stable URL: http://www.jstor.org/stable/40271592
Page Count: 8
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The Global Side of the Investment-Saving Puzzle
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Abstract

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.

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