The Saving-investment Relationship Revisited: New Evidence from Regime-switching Cointegration Approach

Smruti Ranjan Behera, Lingaraj Mallick and Tapas Mishra

International Economic Journal, 2024, vol. 38, issue 2, 236-269

Abstract: This paper exploits the regime-switching threshold cointegration approach to elicit the dynamics in the saving-investment relationship and capital mobility in India. Empirical results offer key insights into the threshold cointegration between the saving and investment rates. We find that the adjustment in investment rate in the upper regime is faster than in the lower regime, indicating the higher mobility of capital in the upper regime. Further, results reveal the absence of firm evidence of long-run vs. short-run asymmetries between saving and investment rates. However, results suggest that cumulative positive and negative sums of saving rates affect investment rates. We have made adjustments to cyclical and trend patterns in our data using Hamilton's (2018) filter and have produced robust results with regard to asymmetric cointegration. The posterior estimation results suggest that a downward trend in the saving rates substantially impacts the investment rates, and widening the gap between saving and investment rates facilitates huge mobility of international capital in the long run.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10168737.2024.2302817 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:38:y:2024:i:2:p:236-269

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

DOI: 10.1080/10168737.2024.2302817

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().