Savings rates and output variability in industrial countries

Joseph Gagnon and Garry Schinasi ()

No 363, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The economics literature offers competing hypotheses about the relationship between savings rates and output variability. This paper examines data for eight industrial countries to determine if there is a discernible pattern between savings rates and cyclical volatility of output. We find a striking coincidence of high gross savings rates and high output variability when real GDP gaps are estimated from a constant growth trend. But there is also strong evidence that this coincidence is an artifact. The major conclusion is that there is not a robust relationship between average gross savings rates and the variability of real GDP gaps (measured as deviations from trends) between 1960-Q1 and 1988-Q4. We also report a number of interesting features regarding estimated autoregressive processes for output in the major foreign industrial countries.

Keywords: Saving and investment; Business cycles (search for similar items in EconPapers)
Date: 1989
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