higher uncertainty of the income stream increases the precautionary savings motive of households. They have a desire to save … and a precautionary savings motive will lead to procyclical capital out ows at business cycle frequency and a higher long …

Feldstein and Horioka (1980) argued that the correlation of saving and investment in a cross-section of countries may … investment should be cointegrated over time. Simulations show that the cross-section regressions used in the literature will …

, which is that even though global financial markets appear to be integrated, levels of saving and investment are correlated …