Savings and Investment Correlations in Response to Monetary Policy Shocks: New Insights into the Feldstein-Horioka Puzzle?
new insights into the Feldstein-Horioka puzzle?
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Date
2006-08
Publication Type
Working Paper
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yes
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Abstract
In this paper, it is argued that the observed high positive correlation be tween national savings and investment which is found in the data can in part be explained by shocks to monetary policy. This hypothesis, which is established by reviewing some empirical findings, is tested in a two-country DSGE-model framework in the tradition of the New Open Economy Macroeconomics. The simulation results obtained support the idea that shocks to monetary policy might contribute to the explanation of the Feldstein-Horioka puzzle.
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published
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Volume
144
Pages / Article No.
Publisher
KOF Swiss Economic Institute, ETH Zurich
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Subject
Feldstein-Horioka Puzzle; Monetary Policy Shocks; MONETARY POLICY; SPARKASSEN + ERSPARNISSE (BANKWESEN); Savings Investment Correlations; INVESTMENTS; SAVINGS BANKS + SAVING; Local-currency pricing; INVESTITIONEN; GELDPOLITIK
Organisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute