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

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.

Bibliographic Details

Main Author:	Inter-American Development Bank
Other Authors:	Eduardo A. Cavallo
Format:	Working Papers biblioteca
Language:	English
Published:	Inter-American Development Bank
Subjects:	Economy, Investment, C23 - Panel Data Models • Spatio-temporal Models E2 - Consumption Saving Production Investment Labor Markets and Informal Economy, F36 - Financial Aspects of Economic Integration, Panel cointegration;Investment;Feldstein-Horioka puzzle;Saving,
Online Access:	https://doi.org/10.18235/0000138 https://publications.iadb.org/en/what-relationship-between-national-saving-and-investment-latin-america-and-caribbean
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