A Panel Cointegration study of the long-run relationship between Savings and Investments in the OECD economies, 1970-2007

In this paper we test for the existence of a long-run savings-investments relationship in 18OECD economies over the period 1970-2007. Although individual modelling provides only veryweak support to the hypothesis of a link between savings and investments, this cannot be ruledout as individual time series tests may have low power. We thus construct a new bootstrap testfor panel cointegration robust to short- and long-run dependence across units. This testprovides evidence of a long-run savings-investments relationship in about half of the OECDeconomies examined. The elasticities are however often smaller than 1, the value expectedunder no capital movements.