Abstract

Using panel cointegration techniques and a comprehensive data set covering the period 1980–2013, this paper finds a positive and significant correlation between national saving and domestic investment rates in Latin America and the Caribbean. The estimated correlation is approximately 0.39; that is, for every one percentage point of GDP increase in national saving, domestic investment increases by 0.39 percentage points, on average. There are, however, three nuances to the headline result: (i) the estimated correlation has been declining over time; (ii) the regional average hides a large degree of intraregional heterogeneity; and (iii) the estimated coefficient is largest among the biggest economies in the region. Low national saving rates remain a binding constraint for capital accumulation in Latin America and the Caribbean.

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Additional Information

ISSN
1533-6239
Print ISSN
1529-7470
Pages
pp. 29-53
Launched on MUSE
2016-05-07
Open Access
No
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