Saving-Investment Nexus and International Capital Mobility in India: Revisiting Feldstein-Horioka Hypothesis
AbstractThe paper employing ARDL cointegration approach examined the Feldstein-Horioka (FH)(1980) postulate on international capital mobility for India during 1950-51 to 1990-1991 and during 1950-51 to 2006-07. It finds a robust long-run cointegrating relationship between saving and investment rates in India with the former explaining the latter without any feedback, implying lower degree of international capital mobility. Conforming to the F-H hypothesis, the relationship between saving and investment rates was found to be weaker with the inclusion of post-reform period, characterized by a more liberalized regime on capital flows, than during the pre-reform period. In the short-run also the relationship between saving and investment rates was found to be strong, indicating the influence of temporary shocks emanating from business cycle. That the long-run equilibrium relationship between saving and investment rates could not be statistically distinguished from one imply a sustainable current account balance in India.
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Bibliographic InfoArticle provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.
Volume (Year): 45 (2010)
Issue (Month): 1 ()
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- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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- Khundrakpam, Jeevan Kumar & George, Asish Thomas, 2012. "An Empirical Analysis of the Relationship between WPI and PMI-Manufacturing Price Indices in India," MPRA Paper 50929, University Library of Munich, Germany.
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