The relationship between national saving and investment in Latin America and the Caribbean

Cavallo, Eduardo and Pedemonte, Mathieu (2016) The relationship between national saving and investment in Latin America and the Caribbean. Economía, 16 (2). 29 - 54. ISSN 1529-7470

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Abstract

Using panel cointegration techniques and a comprehensive data set 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. The estimated correlation is approximately 0.39; that is, for every one 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 intraregional heterogeneity; and (iii) the estimated coefficient is largest among the biggest economies in the region. Low national saving rates remain a binding constraint for capital accumulation in Latin America and the Caribbean.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2016 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance H Social Sciences > HB Economic Theory
JEL classification:	C - Mathematical and Quantitative Methods > C2 - Econometric Methods: Single Equation Models; Single Variables > C23 - Models with Panel Data F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment
Date Deposited:	08 Jul 2024 11:15
Last Modified:	12 Dec 2024 04:12
URI:	http://eprints.lse.ac.uk/id/eprint/123167

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