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International Capital Flows and the Frankel-Dooley-Mathieson Puzzle

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  • Shigeyuki Hamori

    ()
    (Faculty of Economics, Kobe University)

Abstract

Frankel et al (1986) pointed out that industrialized countries have larger saving rate coefficients than do developing countries in the framework of Feldstein-Horioka puzzle. This is referred to as the Frankel-Dooley-Mathieson puzzle in this paper. This paper extends past analyses by incorporating indices of a domestic institutional and policy environment. Applying the resulting model to Sub-Saharan African countries, saving rate coefficients larger than those previously imagined were obtained. These results are consistent with the reality of capital regulations and other factors resulting in low capital flows in developing countries.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 15 (2007)
Issue (Month): 19 ()
Pages: 1-12

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Handle: RePEc:ebl:ecbull:eb-07o10012

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Keywords: capital mobility;

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  1. Dekle, Robert, 1996. "Saving-investment associations and capital mobility On the evidence from Japanese regional data," Journal of International Economics, Elsevier, vol. 41(1-2), pages 53-72, August.
  2. Jeffrey A. Frankel & Michael P. Dooley & Donald Mathieson, 1986. "International Capital Mobility in Developing Countries vs. Industrial Countries: What do Saving-Investment Correlations Tell Us?," NBER Working Papers 2043, National Bureau of Economic Research, Inc.
  3. Tesar, Linda L., 1991. "Savings, investment and international capital flows," Journal of International Economics, Elsevier, vol. 31(1-2), pages 55-78, August.
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  7. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  8. Tsung-wu Ho, 2002. "A panel cointegration approach to the investment-saving correlation," Empirical Economics, Springer, vol. 27(1), pages 91-100.
  9. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  10. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  11. Murphy, Robert G., 1984. "Capital mobility and the relationship between saving and investment rates in OECD countries," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 327-342, December.
  12. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  13. Rodrik, Dani, 2000. "Institutions For High-Quality Growth: What They Are And How To Acquire Them," CEPR Discussion Papers 2370, C.E.P.R. Discussion Papers.
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