THEORY-BASED MEASUREMENT OF THE SAVING-INVESTMENT CORRELATION WITH AN APPLICATION TO NORWAY

摘要: I. INTRODUCTION The findings of Feldstein and Horioka [19c,0] have led to numerous theoretical empirical papers on the close correlation between domestic saving investment its supposed implications for international capital mobility. [1980, 317] state that "with perfect world mobility, there should be no relation investment: in each country responds worldwide opportunities while is financed by pool capital." However, a cross-country regression using period-averaged figures sixteen OECD countries, they obtain significant coefficient unity conclude rather immobile. This result constitutes "Feldstein-Horicka puzzle," as it contradicts widely held perception highly mobile across countries. Subsequent work confirmed correlation, though implication degree mobility moot point (see Tesar [1991]). paper contributes understanding puzzle both counts. First, we present theory-based econometric specification estimating correlations. Second, discuss possible usefulness estimates detecting Third, provide results interesting case Norway. We argue Horioka's basic idea saving-investment contains information about correct, but interpretation estimated value must altered substantially view derived from modern macroeconomic models. Our research motivated observation various equations been used measure none them has firm foundation. turn raises questions comparability existing results. propose an founded intertemporal general equilibrium models, which agents optimize under budget constraints. show time-series studies misspecified cross-section are seriously flawed because neglect dynamics. As may out artifact caused measurement errors. significance reliable correlations goes beyond solving "Feldstein-Horioka represent stylized facts open economy models explain. Norway serves suitable example cement our methodological arguments with evidence, thanks system controls, were phased during 1970s 1980s, oil discoveries small size. demonstrate failure take structural breaks into account distorts picture, making strong careful diagnostic testing. main puzzle" does not exist proceeds follows. In section II briefly summarize discussion regarding findings. III derive theory, compare previous specifications, how make inferences IV sketch major developments post-war Norwegian economy, notably abolition controls emergence important sector. Section V presents VI summarizes concludes. II. THE FELDSTEIN-HORIOKA PUZZLE Many authors high stable studies. …