THE INVESTMENT-SAVING PUZZLE IN MENA COUNTRIES: DISENTANGLING GROSS SAVING

The paper disentangles gross savings into government and private savings and investigate their impact on gross investment. Our methodology is based on a balanced panel of four MENA countries (Tunisia, Jordan, Egypt and Lebanon) for the period 2000-2017 by employing the Panel Vector Autoregressive Model (PVAR). Our findings show that government savings as a ratio of GDP does not have any impact on investment while private savings as a ratio of GDP does. Both variables exhibit the correct signs. The results also show that mobility of private saving is high and seemingly statistically inconsistent with the Fielstein and Horioka (1980) puzzle. Our paper also reveals that even though OECD countries are more open than our sample countries, the higher capital mobility of our sample is driven by the economic and political instability in the region.