Canadian Journal of Economics (1992) XXV(3), August, 708 728.
It has recently been shown that industrialized countries in the 1970s and 1980s are
characterized by a high correlation between national saving and investment. This regularly
is considered puzzling in the context of highly integrated international capital markets. In this
paper we show that both the failure of real interest parity and productivity changes are each
sufficient to generate a high positive correlation between national saving and investment.