The saving‐investment relationship in periods of structural change: The case of Greece

Abstract

Purpose

To study the dynamic relationship between saving‐investment in Greece during a period of structural changes with policy regime changes employing different methods of estimation.

Design/methodology/approach

Different empirical methods are used to estimate the time varying savings retention coefficient. A recursive OLS, rolling OLS, Kalman filter estimator and Markov switching regime modeling (MS‐R) are applied which have the advantage to capture the dependence structure of the series both in terms of constant and variance.

Findings

The empirical evidence suggests that the degree of correlation between saving and investment weakens during financial liberalization periods.

Practical implications

Conclusions drawn from this analysis could be useful for the analysis of other medium‐sized economies.

Originality/value

The paper employs four different estimation models to test the stability of the estimated coefficient. The MS‐R is used, for the first time, to take into account the policy regime changes during the estimation period.

Citation

Papapetrou, E. (2006), "The saving‐investment relationship in periods of structural change: The case of Greece", Journal of Economic Studies, Vol. 33 No. 2, pp. 121-129. https://doi.org/10.1108/01443580610666073