Capital mobility and global factor shocks

This paper focuses on the effects of global factors on the saving investment relationship. We prove that, if investments and savings are affected by idiosyncratic and global components, they must be cointegrated to obtain reliable estimates of the saving-retention coefficient. When global shocks are taken into account through common factors, we find that the estimated saving-retention coefficient is close to zero for a panel of 21 OECD countries. (C) 2013 Elsevier B.V. All rights reserved.