Prague Economic Papers 2009, 18(3):195-208 | DOI: 10.18267/j.pep.349

What Do Productivity Shocks Tell Us About the Saving-Investment Relationship?

Lutfi Erden, Ibrahim Ozkan, Burak Gunalp
Hacettepe University, Department of Economics, Beytepe, Ankara, Turkey (lerden@hacettepe.edu.tr; iozkan@hacettepe.edu.tr; gunalp@hacettepe.edu.tr).

This study is a contribution to the empirical literature on the significance of productivity shocks in explaining a high saving-investment correlation, using data from a panel of 21 OECD countries over the period 1970-2003. The study looks at the distributional properties of the productivity shocks in order to test if productivity shocks can relate saving to investment. To this end, we divide the countries into three groups with respect to the distributional characteristics of productivity shocks in each country with an application of the Fuzzy-c-means (FCM) clustering technique. The results provide some support for the productivity shock argument, indicating that the saving retention coefficients are greater for the countries subject to large productivity shocks in magnitude.

Keywords: Feldstein-Horioka Puzzle, Productivity Shocks, Fuzzy Clustering, International Capital Mobility, Kolmogorov-Smirnov Statistics
JEL classification: C23, C40, F21, F41

Published: January 1, 2009  Show citation

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Erden, L., Ozkan, I., & Gunalp, B. (2009). What Do Productivity Shocks Tell Us About the Saving-Investment Relationship? Prague Economic Papers, 18(3), 195-208. doi: 10.18267/j.pep.349
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