Macroeconometric modeling of saving and investment for Mercosur countries

Abstract

In the long run, the present value of current account balance can not grow indefinitely large without precipitating in a macroeconomic crisis. This simple insight produces an econometrically testable relationship between saving and investment. We use data for four countries, which belong to the Mercosur Common Trade Agreement: Argentina, Brazil, Paraguay and Uruguay. The results indicate that there is no long run relationship between saving and investment in these countries. Thus, Mercosur is likely to act as a palliative against such a possibility in the future.