Crowding Out in Open Economies: Results from a Simulation Study

Emanuela Cardia ()

Canadian Journal of Economics, 1992, vol. 25, issue 3, 708-28

Abstract: It has recently been shown that industrialized countries in the 1970s and 1980s are characterized by a high correlation between national saving and investment. This regularly is considered.puzzling in the context of highly integrated international capital markets. In this paper, the author shows that both the failure of real interest parity and productivity changes are each sufficient to generate a high positive correlation between national saving and investment. These results indicate that it is easier than previously thought to reproduce a high correlation between saving and investment in models with perfect capital mobility.

Date: 1992
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