Feldstein-Horioka Pazzle

The national saving rate is highly correlated with its domestic investment rate, which is not supported by the standard economic theory assuming open international financial economy.


Baxter and Crucini (1993) "Explaining Saving Investment Correlations"

"Saving-investment correlations are higher for larger countries."

COUNTRY SIZE AND SAVING-INVESTMENT CORRELATIONS

Country           GNP(1985 U.S. $)   S-I correlation
United States       3,994                    0.86
Japan                  1,365                     0.80
Germany                667                     0.68
France                   527                     0.31
Italy                       372                     0.39
Canada                 347                      0.61
Australia               171                      0.54
Switzerland           106                      0.65