We use the Coakley, Kulasi and Smith (1996) current account solvency model to investigate saving and investment in LDCs. This model implies that saving and investment cointegrate with a unit coefficient irrespective of the degree of capital mobility. Our panel and conventional unit root tests...

A country's intertemporal budget constraint implies current account stationarity or that its saving and investment rates should cointegrate. However, such behaviour may not pertain in finite sample spans where the current account could be subject to persistent shocks. Accordingly, this paper...