Domestic Savings and International Capital Flows, W.A. Mackintosh Lecture 1979

Martin S. Feldstein and Charles Yuji Horioka ()

Working Papers from Queen's University, Department of Economics

Abstract: This paper uses new statistical estimates to compare two views of international capital mobility. With perfect capital mobility, there would be little or no relation between the amount of saving generated in a country and domestic investment in that country. In contrast, if portfolio preferences and institutional rigidities impede the flow of long-term capital among countries, increases in domestic savings would be reflected primarily in additional domestic investment. The statistical evidence present implies the truth lies closer to the second view than the first. International differences in domestic savings rates among major industrial countries have resulted in almost equal corresponding differences in domestic investment rates.

Date: Written

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