International capital mobility: Evidence from panel data

To test whether capital is internationally mobile, some researchers have examined the relationship between saving and investment. Using time averaged data, they find saving and investment to be related, and conclude that capital is relatively immobile. In this paper, I argue that a country's intertemporal budget constraint biases results using time averaged data against finding capital mobility. Using annual data, pooled for 21 OECD countries over the 1962-90 period, I find the estimated impact of saving on investment to be considerably smaller than previous estimates. (JEL F32). Copyright (C) 1996 Elsevier Science Ltd