SAVING-INVESTMENT DYNAMICS AND CAPITAL MOBILITY IN THE US AND JAPAN

This paper points out that a high long-run correlation between saving and investment is better interpreted as reflecting the operation of a country's intertemporal budget constraint rather than as an indicator of capital mobility. Inferences about capital mobility can instead hi: made from the divergent short-run dynamic responses of saving and inv estment to shocks. Using post-war quarterly data for the US and japan, the paper assesses the characteristics of saving and investment behav ior under different regulatory environments. It finds mixed evidence o f changes in the short-run dynamics of saving and investment that sugg est increased capital mobility in the 1980s. Published by Elsevier Sci ence Ltd.