The relationship between saving and investment for Japan

Narayan, Paresh Kumar 2005, The relationship between saving and investment for Japan, Japan and the world economy, vol. 17, no. 3, pp. 293-309.

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Title The relationship between saving and investment for Japan
Author(s) Narayan, Paresh Kumar
Journal name Japan and the world economy
Volume number 17
Issue number 3
Start page 293
End page 309
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2005-08
ISSN 0922-1425
Summary In this paper, we revisit the saving and investment nexus as postulated by Feldstein and Horioka (FH) [Econ. J. 90 (1980) 314]. We test for cointegration between saving and investment using the recently developed bounds testing approach to cointegration and derive the long-run elasticities using the autoregressive distributed lag modeling approach for Japan over the period 1960–1999. We establish the unit root properties of the data in the presence of structural break(s) using the Zivot and Andrews (ZA) [J. Business Econ. Stat. 10 (1992) 251] and the Lumsdaine and Papell (LP) [Rev. Econ. Stat. 79 (1997) 212] tests. Finally, we ascertain the direction of causation between saving and investment by using the bootstrap approach. Amongst our key results we find that saving and investment are cointegrated for Japan; investment causes saving and saving causes investment; shocks to saving and investment have a permanent effect; and the long-run coefficient on saving is 0.68, implying a moderate rate of correlation. From the latter finding, we believe that there is no puzzle between saving and investment in the case of Japan, a result contrary to FH (1980).
Language eng
Field of Research 140203 Economic History
140302 Econometric and Statistical Methods
HERDC Research category C1.1 Refereed article in a scholarly journal
Persistent URL http://hdl.handle.net/10536/DRO/DU:30024669

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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