Saving, Investment and capital mobility in G-7 countries: Time varying parameters approach
This paper investigates the relationship between domestic saving (S) and investment (I) to assess degree of capital mobility for G7 countries during the period 1960- 2007. To this end, Engle-Granger (1987) and Gregory-Hansen (1996) residual based co-integration tests was firstly applied for each of the G7 countries, but we did not find any evidence of a long-run relationship between S and I. Extending the analysis to time varying parameters (TVP) approach to see changes in the capital mobility over time, the findings suggest that there is no significant increase in capital mobility in the sense of Feldstein-Horioka (1980). © EuroJournals Publishing, Inc. 2010.