EMPIRICAL ANALYSIS OF SAVINGS AND INVESTMENTS RELATION IN TURKEY: COINTEGRATION TEST WITH STRUCTURAL BREAKS APPROACH

Abstract

Purpose- The main aims of the economic growth policies implemented by governments are to reach high and sustainable economic growth rates. In this regard, to define the relation between economic growth and national savings is quite impotant. Savings are very important in terms of economic growth that makes it an important issue in order to achieve economy policy targets.

Methodology-  In this study, the relation between savings rates and investment rates will be investigated in the context of Feldstein – Horioka (1980) puzzle for the Turkish economy for the period from 1980 to 2015.

Findings- Empirical findings show that variables have unit roots. Results obtained from Bai – Perron (2003) co-integration test which taking structural breaks into considiration show that there is a structural break in 1999 and the time span is taken into two sub-period. According to test results, the investigated relation between investments and savings is weak in the first period (1980 – 1998), while it is stronger in the second period starts from 1999 till 2015.

Conclusion- Investment rates are above the savings rates in the entire analysis period. This situation reveals as one of the main reason of current account deficit in Turkish economy.

Keywords

• Savings,investments,structural breaks,co-integration,economic growth

References

1. Altıntaş, H. ve Taban, S. 2011, “Twin Deficit Problem and Feldstein-Horioka Hypothesis in Turkey: ARDL Approach and Investigation of Causality” International Research Journal of Finance and Economics, 74: 30-45.
2. Ayaydın ve Baltacı, 2012,” Finansal Açıklık, Sermaye Hareketliliği, Tasarruf ve Yatırım İlişkisi: BRICS Ülkeleri Örneği”, Gazi Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 14/2, ss. 51-74.
3. Bai, J., & Perron, P. 2003. “Computation and analysis of multiple structural change models.” Journal of applied econometrics, 18(1), 1-22.
4. Bayoumi, 1990, “Saving-investment correlations: immobile capital, government policy, or endogenous behavior?” Staff Papers-International Monetary Fund, 360-387
5. Blanchard ve Giavazzi, 2002. "Current account deficit in the Euro area: The end of the Feldstein-Horioka Puzzle?", Brookings Papers on Economic Activity, 2, ss. 147-186.
6. Bolatoğlu, N. 2005, “Türkiye’de Yurt içi Yatırım ve Yurt içi Tasarruf Oranları Arasındaki İlişki” Ekonomik Yaklaşım, 16(56):19-32.
7. Dickey, David and Wayne Fuller. 1979, “Distribution Of The Estimators For Autoregressive Time Series With A Unit Root”, Journal of The American Statistical Association, 74, ss:427- 431.
8. Dickey, David and Wayne Fuller. 1981, “Likelihood Ratio Statistics For Autoregressive Time Series With A Unit Root” Econometrica, 49, ss:1057-72.

9. Dooley, Frankel & Mathieson, 1987, “International capital mobility: What do saving-investment correlations tell us?” Staff Papers-International Monetary Fund, 503-530
10. Erataş vd., 2013, “Feldstein-Horioka Bilmecesinin Gelişmiş Ülke Ekonomileri Açısından Değerlendirilmesi: Panel Veri Analizi”, Çankırı Karatekin Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 3(2), ss.18-
11. Erden, L. 2005, “Structural Adjustment and Domestic Private Saving and Investment Interaction in Turkey: A Cointegration Analysis” Yönetim ve Ekonomi, 12(1):95-103.
12. Esen, E., Yıldırım, S. ve Kostakoğlu, F. 2012, “Feldstein-Horioka Hipotezinin Türkiye Ekonomisi için Sınanması: ARDL Modeli Uygulaması” Eskişehir Osmangazi Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 7(1):251-267.
13. Feldstein ve Horioka, 1980, "Domestic saving and international capital flow", The Economic Journal, 90, p.15
14. Feldstein, 1983, “Domestic Saving and International Capital Movements in The Long Run and The Short Run”, European Economic Review, Vol.21, No: 1-2, pp.129-151.
15. Giannone ve Lenza, 2004. "The Feldsteın-Horıoka Fact”, Workıng Paper Series, No 873
16. Ho, 2002, “The Feldstein–Horioka puzzle revisited”, Journal of International Money and Finance, 21, pp:555–564.
17. Ketenci, 2010, “The Feldstein Horioka Puzzle by Groups of OECD Members: the Panel Approach”, MPRA Papers, http://mpra.ub.uni-muenchen.de/25848/, ss. 1-25
18. Kollias vd., 2008, “The Feldstein–Horioka puzzle across EU members:Evidence from the ARDL bounds approach and panel data”, International Review of Economics and Finance, 17, pp:380–387
19. MacKinnon, James. 1996. Numerical Distribution Functions For Unit Root and Cointegration Tests, Journal of Applied Econometrics, 11, ss:601–618.
20. Obstfeld, 1995, International capital mobility in the ‘90s. In P. B. Kenen (Ed.), Understanding Interdependence: The Macroeconomics of the Open Economy (pp. 201−261). Princeton: Princeton University Press
21. Penati & Dooley, 1984, “Current Account Imbalances and Capital Formation in Industrial Countries”,. Staff Papers-International Monetary Fund, 1-24
22. Wong, 1990, “What do saving-investment relationships tell us about capital mobility?” Journal of International Money and Finance, 9(1), 60-74 (Di Iorio & Fachin, 2007