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Interpreting Saving-Investment Correlations Author info | Abstract | Publisher info | Download info | Related research | Statistics W. Jansen ()
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Feldstein and Horioka (1980) argued that the cross-sectional correlation of saving and investment provides a test of global capital mobility. We argue that the long-run correlation is determined by the intertemporal budget constraint, limited capital mobility and current account targeting. The short-run correlation reflects limited capital mobility and adjustment to supply and demand shocks. Our empirical analysis shows that the short-run correlation varies across countries and not over time, which suggests that it is a country-specific business cycle fact. The long-run correlation has substantially decreased over time, which suggests that limited capital mobility is partly responsible for its high value in the past. Copyright Kluwer Academic Publishers 1998
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Article provided by Springer in its journal Open Economies Review .
Volume (Year): 9 (1998)
Issue (Month): 3 (July)
Pages: 207-219
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Handle: RePEc:kap:openec:v:9:y:1998:i:3:p:207-219Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323
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Keywords: investment ; saving ; capital mobility ; Other versions of this item:
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Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Herwartz, Helmut & Xu, Fang, 2007.
"A functional coefficient model view of the Feldstein-Horioka puzzle ,"
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2007,14, Christian-Albrechts-University of Kiel, Department of Economics.
[Downloadable!]
Kumar, Saten & Rao, B. Bhaskara, 2009.
"A Time Series Approach to the Feldstein-Horioka Puzzle with Panel Data from the OECD Countries ,"
MPRA Paper
18464, University Library of Munich, Germany.
[Downloadable!]
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