International Mobility of Capital in the United States: Robust Evidence from Time-Series Tests

摘要

This study examines the relationship between domestic saving and investment and measures the international mobility of capital in the United States. The long-run model, "with" and "without" structural breaks, is estimated using several single-equation and system estimators to assess the robustness of results and take an exhaustive account of the methodological and measurement issues. The results provide dominant support for the long-run relationship between domestic saving and investment. The estimates of the slope parameter on saving above zero and the dominant support for cointegration between saving and investment across estimators vindicate the validity of intertemporal budget constraint and suggest the sustainability of current account deficits. The numerical magnitude of the slope parameter on saving is consistently low across estimators. The results showing the low slope parameter on saving resonate with the observed high mobility of capital. The estimates of the model with structural breaks reinforce the dominant support for the long-run relationship between domestic saving and investment. The inclusion of these structural breaks in the model generally reduces the numerical magnitude of the slope parameter on saving and suggests the high mobility of capital.