What is the Relationship between National Saving and Investment in Latin America and the Caribbean?

Eduardo Cavallo and Mathieu Pedemonte

No 7204, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Using panel co-integration techniques and a comprehensive dataset covering the period 1980-2013, this paper finds a positive and significant correlation between national saving and domestic investment rates in Latin America and the Caribbean (LAC). The estimated correlation is approximately 0. 39; i. e. , for every 1 percentage point of GDP increase in national saving, domestic investment increases by 0. 39 percentage points on average. There are however, three nuances to the headline result: i) the estimated correlation has been declining over time; ii) the regional average hides a large degree of intra-regional heterogeneity; and iii) the estimated coefficient is largest amongst the biggest economies in the region. It is concluded that low national saving rates remain a binding constraint for capital accumulation in LAC.

Keywords: Panel cointegration; Investment; Feldstein-Horioka puzzle; Saving (search for similar items in EconPapers)
JEL-codes: C23 E2 F36 (search for similar items in EconPapers)
Date: 2015-08
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:7204

DOI: 10.18235/0000138

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