I should like to thank Andy Rose, Joe Gagnon, Andy Atkeson, and participants at seminars at the IMF and Federal Reserve Board, all of whom have provided useful comments.
The savings and investment data were examined on both a gross and net basis. Only the results for the gross data are reported, since the net data gave similar results. An earlier version of this paper included an analysis of data for developing countries. The results from this data set were similar to those found using industrial countries data, and are not reported for the sake of brevity.
Balassa and Noland (1988) discuss some of the problems of comparing U.S. and Japanese saving and investment rates. What is striking is the size of the differences between the adjusted estimates produced by different researchers.
This fall is not significant at conventional levels of significance. However, it was found to be significant in alternative regressions (not reported) using the actual annual observations for each five year period rather than their mean.
This formulation ignores the effect of changes in government consumption on private sector behavior.
First differences are used in order to make the data stationary.
This figure was chosen as the approximate mean of the estimates in Table 5. It is also within the range of -.2 to -.5 quoted by Bernheim (1987) in a survey of the results from consumption function studies of Ricardian equivalence. A second “Ricardian adjusted” saving series was constructed assuming that the coefficients in Table 5 were the true coefficients, except that the Japanese coefficient was set to 0. The results using these data were unsatisfactory, however, and are not reported.
The European data comes from Mitchell (1980), the Canadian and Australian from Mitchell (1983). Limited U.S. data on decade averages were also collected. However both the saving and the investment rates appeared so much higher and more correlated than for any of the other countries that these data were excluded from the analysis. Including these data the results using level of saving and investment are affected, but not those using changes.
The investment data exclude stocks for the U.K., Denmark, Sweden, Australia and Canada, while include stocks in the case of Germany, Norway and Italy. The German data refer to net investment and net national product, the rest to gross investment and gross national product (or gross domestic product).
The formal test of the equality of the β for the full post-war period with the β from the Gold Standard period yields a single - tailed probability value of .056.
Bayoumi and Rose (1989) find no positive correlation between regional saving and investment using post-war data for the British Isles, in stark contrast to the international post-war data; since governments do not target “regional” current accounts, these results would also appear to point to a significant role for government policy.
These glows do not appear to have been secured by the use of imperialistic force such as gunboat diplomacy. Defaults could and did occur throughout the Gold Standard period (Fishlow (1985)).
The Gold Standard period represents a fixed exchange rate regime. The large fluctuations in nominal exchange rates experienced over the recent floating exchange rate period might explain the high post-1971 saving investment correlations via increased exchange rate uncertainty or large deviations from purchasing power parity. However, the large gross flows of international financial assets in the recent period argue against such an explanation.
The data for the United States, West Germany, United Kingdom, France, Canada, Belgium, Finland and Greece cover the period 1960-1986, those for Japan and Norway the period 1965-1986.
First differences were used in order to make the data stationary.
Similar results (not reported) were found using OECD quarterly National Accounts data.
While this distinction between total investment and total fixed investment matters for the time series regressions, is relatively unimportant for the cross-section results.