Complete vs. Incomplete Market (1)

Baxter, M. and M. J. Crucini. 1995. "Business Cycles and the Asset Structure of Foreign-Trade." International Economic Review

---<quote>----
The within-country correlation between saving and investment is slightly lower in the bond economy compared with the complete markets economy. This might seem surprising, since one's intuition is that closing asset markets, thus forcing individualsto bear more country-specificrisk, would act to increase within-country saving-investment correlations. However, this "basic saving measure" (defined as output minus consumption) need not be a good measure of true saving in an open economy, as discussed by Obstfeld (1986) and Stockman and Svensson (1987).
---<unquote>----