Savings and Investments in the OECD: a panel cointegration study with a new bootstrap test

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