We decompose aggregate saving and investment into its public
and private components and then document a variety of ``stylized facts''
associated with saving and investment rates for a sample of
15 countries over the period 1975--1989. In order to see
whether these empirical relationships are consistent with a
world of perfect capital mobility we develop a multi--country
model with free trade in a riskfree bond and calibrate it to
the fifteen OECD countries. We pay special attential to
modeling ...
We decompose aggregate saving and investment into its public
and private components and then document a variety of ``stylized facts''
associated with saving and investment rates for a sample of
15 countries over the period 1975--1989. In order to see
whether these empirical relationships are consistent with a
world of perfect capital mobility we develop a multi--country
model with free trade in a riskfree bond and calibrate it to
the fifteen OECD countries. We pay special attential to
modeling the fiscal policy rules. The model performs
remarkably well in accounting for a wide variety of time
series relationships. Nonetheless the model is not able to capture the cross
sectional aspect of the data. In particular, the model cannot account
for both the large cross country correlation between aggregate saving and investment
rates and the very negative cross country relationship between the public and
private saving minus investment gaps.
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