Article ID Journal Published Year Pages File Type
5053694 Economic Modelling 2016 9 Pages PDF
Abstract
Will a higher savings rate improve a country's trade imbalance? Using data for 76 countries for the period 1975-2010, we examine the relationship between trade balance, savings rate, and real exchange rate. To address the potential non-linear effects of the savings rate, we use the panel smooth transition regression (PSTR) model with instrumental variables. Our results indicate that countries with a savings rate above the threshold of 14.8% can improve their trade balance by increasing the savings rate or depreciating their currency. Even though the sample is divided into two groups on the basis of income level, the empirical results vary little, suggesting that our findings are robust to the data separation.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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