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Country Size and Investment-Saving Correlation: A Panel Threshold Error Correction Model

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  • Tsung-wu Ho

    ()
    (Department of Economics, Shih Hsin University)

  • Ru-Lin Chiu

    (Shih Hsin University)

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    Abstract

    The Feldstein-Horioka puzzle has caused by the substantial disagreement about the interpretation of the saving-retention coefficient. Baxter and Crucini (1993) propose a general equilibrium model to show that the investment-saving correlation will be large when the country-size, measured by GNP, is large. This paper evaluates this argument by examining the threshold effect of country-size on the saving-retention coefficients. Evidence from a panel of 24 OECD countries confirms this hypothesis.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume27/V27N4P481_490.pdf
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    Bibliographic Info

    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 27 (2001)
    Issue (Month): 4 (Fall)
    Pages: 481-490

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    Handle: RePEc:eej:eeconj:v:27:y:2001:i:4:p:481-490

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    Web page: http://www.ramapo.edu/eea/journal.html
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    Related research

    Keywords: Investment; Saving;

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    References

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    1. Martin Feldstein, 1982. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Working Papers 0947, National Bureau of Economic Research, Inc.
    2. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
    3. W. Jos Jansen, 2003. "International Capital Mobility: Evidence from Panel Data," International Finance 0310003, EconWPA.
    4. Ghosh, Atish R, 1995. "International Capital Mobility amongst the Major Industrialised Countries: Too Little or Too Much?," Economic Journal, Royal Economic Society, vol. 105(428), pages 107-28, January.
    5. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
    6. Jansen, W Jos & Schulze, Gunther G, 1996. "Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 116-32, January.
    7. Husted, Steven, 1992. "The Emerging U.S. Current Account Deficit in the 1980s: A Cointegration Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 159-66, February.
    8. Tesar, L.L., 1988. "Savings, Investment And International Capital Flows," RCER Working Papers 154, University of Rochester - Center for Economic Research (RCER).
    9. Adolfo Sachsida & Marcelo Abi-Ramia Caetano, 1999. "The Feldstein-Horioka Puzzle Revisited," International Trade 9904001, EconWPA.
    10. 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.
    11. Coiteux, Martin & Olivier, Simon, 2000. "The saving retention coefficient in the long run and in the short run: evidence from panel data," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 535-548, August.
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    Cited by:
    1. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.
    2. Kumar, Saten & Sen, Rahul & Srivastava, Sadhana, 2014. "Does economic integration stimulate capital mobility? An analysis of four regional economic communities in Africa," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 33-50.

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