Testing for capital mobility: new evidence from a panel of G7 countries

Paresh Kumar Narayan, Seema Narayan

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Abstract

In this paper, we test the savings-investment relationship for the G7 countries. Upon applying the Gregory and Hansen [Gregory, A.W., Hansen, B.E., 1996. Residual-based tests for cointegration in models with regime shifts, J. Econ. 70, 99-126] residual-based structural break test for cointegration for each of the G7 countries, we did not find any evidence of a cointegrating relationship between savings and investment. Extending the analysis to a panel framework, we could not establish any evidence of panel cointegration. Taken together, our findings suggest that capital in these G7 countries is highly mobile since no long-term relationship exists between savings and investment.

Original languageEnglish
Pages (from-to)15-23
Number of pages9
JournalResearch in International Business and Finance
Volume24
Issue number1
DOIs
Publication statusPublished - Jan 2010
Externally publishedYes

Keywords

  • Cointegration
  • G7 countries
  • Savings-investment

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