The Public-Private Savings Mirror and Causality Relations Among Private Savings, Investment and (Twin) Deficits: A Full Modelling Approach
Journal of Policy Modelling, Vol. 21, No. 5, pp. 579-605, 1999
15 Pages Posted: 3 Jun 2011 Last revised: 29 Aug 2011
Date Written: June 2, 2011
Abstract
Relations between national public and private savings, domestic investment, and the current account are analyzed with the Global Econometric Model (National Institute, London). Simulation results obtained with this full modeling approach for the US, Japan, Germany and the UK are compared with estimation results from partial modeling approached adopted in the literature. The results from the two approaches are rather different. The simulation results indicate that private savings largely offset public savings (and vice versa) in the short run. In contrast with findings in partial models, a smaller effect of aggregate savings on investment is found and government deficits tend to increase current account imbalances.
Keywords: savings, investment, current account, macro-modelling, twin deficits
JEL Classification: E2, E62, F32, H6
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