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

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Abstract:

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.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840500278103

Affiliations: Griffith Business School, Department of Accounting, Finance and Economics, Griffith University, Gold Coast Campus, PMB 50 Gold Coast MC, Queensland 9726, Australia, Email: P.Narayan@Griffith.edu.au

Publication date: September 20, 2005

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