The saving and investment nexus for China: evidence from cointegration tests

The saving and investment nexus as postulated by Feldstein and Horioka (FH) ( 1980 ) is revisited. The saving investment correlation for China is estimated over the periods 1952-1998 and 1952-1994, the latter culminating in a period of fixed exchange rate regime. Amongst the key results, it is found...

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Published inApplied economics Vol. 37; no. 17; pp. 1979 - 1990
Main Author Narayan, Paresh Kumar
Format Journal Article
LanguageEnglish
Published London Taylor & Francis Group 20.09.2005
Taylor and Francis Journals
Taylor & Francis Ltd
SeriesApplied Economics
Subjects
Aggregate analysis
Applied economics
Capital movement
China
Cointegration
Conformity
Correlation analysis
Economic conditions
Economic models
Economic systems
Empirical tests
Fixed exchange rates
Foreign exchange rates
Foreign investment
Hypothesis testing
Investment
Investment policy
Savings
Studies
Time series
China
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ISSN0003-6846
1466-4283
DOI10.1080/00036840500278103

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Summary:The saving and investment nexus as postulated by Feldstein and Horioka (FH) ( 1980 ) is revisited. The saving investment correlation for China is estimated over the periods 1952-1998 and 1952-1994, the latter culminating in a period of fixed exchange rate regime. Amongst the key results, it is found that saving and investment are correlated for China for both the period of the fixed exchange rate and the entire sample period. With high saving-investment correlation, the results suggest that the Chinese economy is in conformity with the FH hypothesis. This is a valid outcome, for in China capital mobility was fairly restricted over the 1952-1994 period as indicated by the relatively low foreign direct investment.
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ISSN:0003-6846
1466-4283
DOI:10.1080/00036840500278103