An Intertemporal Model of Saving and Investment

2016

This article presents a neoclassical growth model with adjustment costs to investment and a variety of different fiscal policies. The goal is to analyze how fiscal policies can influence investment decision, capital accumulation and productivity. The model is calibrated using Brazilian data and a set of experiments is performed to investigate the effect of different taxations. We find that tax on private bonds return has the most significant effect on capital level and productivity. This finding comes from the fact that, in equilibrium, an increase in taxation on bonds return decreases the present value of dividends and firm’s value throughout real interest rate.

Estudos Economicos, 2012

In this article the growth models of Feldman (1928) and Mahalanobis (1953) are extended to consider the analysis of decisions of investment allocation in the context of the Post-Keynesian Growth Model. By adopting this approach it is possible to introduce distributive features in the Feldman-Mahalanobis model that allows us to determine the rate of investment allocation according to the equilibrium decisions of investment and savings. Finally, an additional condition is added to the Post-Keynesian Growth Model in order to fully characterise the equilibrium path in an extended version of this framework, where capital goods are also needed to produce capital goods.

Open Economies Review, 1995

model by including flexible exchange rate and by introducing endogenous fiscal policy. Using this model, I demonstrate how a positive investmentsaving correlation can arise in a world with endogenous fiscal policy. I show that this correlation does not depend on capital mobility and therefore is compatible with any degree of capital mobility. This implies that the observed investment-saving comovement is not necessarily due to imperfect capital mobility. The model has a testable implication: it predicts a lack of Granger causality from private saving to private investment. Empirical examination of this prediction indicates that U.S. time series data is compatible with the hypothesis of endogenous fiscal policy during a flexible exchange rate period, but not during a fixed exchange rate period.

RePEc: Research Papers in Economics, 2011

In this article the growth models of Feldman (1928) and Mahalanobis (1953) are extended to consider the analysis of decisions of investment allocation in the context of the Post-Keynesian Growth Model. By adopting this approach it is possible to introduce distributive features in the Feldman-Mahalanobis model that allows us to determine the rate of investment allocation according to the equilibrium decisions of investment and savings. Finally, an additional condition is added to the Post-Keynesian Growth Model in order to fully characterise the equilibrium path in an extended version of this framework, where capital goods are also needed to produce capital goods.

Estudos Econômicos (São Paulo), 2012

In this article the analysis developed by Feldman (1928) and Mahalanobis (1953) are incorporated to the Post-Keynesian Growth Model to consider the decisions of investment allocation on economic growth. By adopting this approach it is possible to study the interaction between distributive features and investment allocation which allows us to determine the rate of investment allocation according to the equilibrium decisions of investment and savings. Finally, an additional condition is added to the Post Keynesian Growth Model in order to fully characterise the equilibrium path in an extended version of this framework, where capital goods are also needed to produce capital goods.

2021

We estimate the relationship between GDP per capita growth and the growth rate of the national savings rate using a panel of 130 countries over the period 1960-2017. We find that GDP per capita growth increases (decreases) the growth rate of the national savings rate in poor countries (rich countries), and a higher credit-to-GDP ratio decreases the national savings rate as well as the income elasticity of the national savings rate. We develop a model with a credit constraint to explain the growth-saving relationship by the saving behavior of entrepreneurs at both the intensive and extensive margins. We further present supporting evidence for our theoretical findings by utilizing cross-country time series data of the number of new businesses registered and the corporate savings rate.

Journal of Economics Zeitschrift f�r National�konomie, 1998

This note extends the basic endogenous-growth model by Barro [Journal of Political Economy (1990) 98: S 103-S 125]. It is supposed that the government pays lump-sum transfers to the representative household or levies a lump-sum tax, besides financing public investment. Growth and welfare effects of fiscal policy are studied for the competitive economy and the growth rate of the social optimum is compared with the one of the competitive economy.

Macroeconomic Dynamics, 2021

We estimate the relationship between GDP per capita growth and the growth rate of the national saving rate using a panel of 130 countries over the period 1960–2017. We find that GDP per capita growth increases (decreases) the growth rate of the national saving rate in poor countries (rich countries), and a higher credit-to-GDP ratio decreases the national saving rate as well as the income elasticity of the national saving rate. We develop a model with a credit constraint to explain the growth-saving relationship by the saving behavior of entrepreneurs at both the intensive and extensive margins. We further present supporting evidence for our theoretical findings by utilizing cross-country time series data of the number of new businesses registered and the corporate saving rate.

Metroeconomica, 2009

Financial instability is the new challenge for monetary policy. Most studies indicate that financial crises follow prolonged unwinding of investment-saving imbalances (ISI). These phenomena are not contemplated by the standard theoretical framework of continuous intertemporal equilibrium. This paper's aim is to take a first step into the analysis of monetary policy in the context of ISI. First, a dynamic model of a flex-price, competitive economy is presented where ISI are allowed to develop. Second, upon introducing different types of Taylor rules, some indications for the conduct of monetary policy emerge, which are at variance with the standard view.

Macroeconomic Dynamics, 2010

This paper characterizes analytically the saving rate in the Ramsey-Cass-Koopmans model with a general production function when there exists both exogenous and endogenous growth. It points out conditions involving the share of capital and the elasticities of factor and intertemporal substitution under which the saving rate path to its steady-state value exhibits overshooting, undershooting, or is monotonic. Simulations illustrate these interesting dynamics. The paper also identifies the general class of production functions that render the saving rate constant along the entire transition path and hence make the Ramsey-Cass-Koopmans model isomorphic to that of Solow-Swan.

2000

This paper provides a descriptive analysis of the long-and short-run correlations among saving, investment, and growth rates for 123 countries over the period 1961-94. Three results are robust across data sets and estimation methods: i) lagges saving rates are positively related to investment rates; ii) investment rates Granger cause growth rates with a negative sign; iii) growth rates Granger-cause investment with a positive sign.

Journal of Political Economy, 1969

This paper studies an overlapping generations economy with capital where limited communication and stochastic relocation create an endogenous transactions role for fiat money. We assume a production function with a knowledge externality (Romer-style) that nests economies with endogenous growth (AK form) and those with no long-run growth (the Diamond model). We show that the Tobin effect is always operative. Under CRRA (constant relative risk aversion) preferences, a mild degree of social increasing returns is sufficient (but not necessary) for some positive inflation to dominate zero inflation and for the Friedman rule to be suboptimal, irrespective of the degree of risk aversion.

Journal of International Economics, 1994

This paper studies the effects of supply and demand shocks on the optimal investment and savings decisions of economic agents in a small open economy. The two building blocks of the setup are adjustment costs in investment and a recursive time preference structure. It is shown that the model can mimic certain stylized facts.

The Quarterly Journal of Economics, 1967

2015

The purpose of this article is to carefully lay out the internal monetary and fiscal transmission mechanisms in the context of a New Keynesian model, with a particular focus on the role of capital - the most vital ingredient in the transition from the basic framework to the medium - scale DSGE models. The key concept of this paper is the form of the monetary policy: we assume a two-channel monetary policy, i.e. it is conducted through a rule for money supply and a Taylor-type rule for interest rates, in order to keep up with the ECB and Fed’s policies. We also adopt a simple fiscal policy rule for public consumption to examine the interactions between fiscal and monetary policy. Finally, in order to capture the crisis effects we introduce exogenous shocks to both monetary and fiscal policy rules.