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Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks

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  • Rao, B. Bhaskara
  • Tamazian, Artur
  • Kumar, Saten

Abstract

A systems GMM estimation method is used to estimate the Feldstein-Horioka equation from 1960-2007 with a panel of 12 OECD countries. It is found that the Feldstein-Horioka puzzle exists in a weaker form with a much reduced saving retention coefficient. The Bretton Woods agreement in particular has weakened the Feldstein-Horioka puzzle by significantly improving international capital mobility. In comparison the Maastricht agreement seems to have improved capital mobility only by a small magnitude. The Blundell and Bond approach systems GMM method and the structural break tests of Mancini-Griffoli and Pauwels are used in this paper.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15312.

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Date of creation: 19 May 2009
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Handle: RePEc:pra:mprapa:15312

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Keywords: Feldstein-Horioka puzzle; Structural breaks; Effects of Bretton Woods and Maastricht agreements on international capital mobility.;

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Cited by:
  1. 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, Elsevier, vol. 29(C), pages 33-50.
  2. Rao, B. Bhaskara & Vadlamannati, Krishna Chaitanya, 2010. "Globalization and growth in the low Income African countries with the extreme bounds analysis," MPRA Paper 21924, University Library of Munich, Germany.
  3. Bangake, Chrysost & Eggoh, Jude C., 2012. "Pooled Mean Group estimation on international capital mobility in African countries," Research in Economics, Elsevier, Elsevier, vol. 66(1), pages 7-17.
  4. Rao, B. Bhaskara & Hassan, Gazi, 2009. "Are the Direct and Indirect Growth Effects of Remittances Significant?," MPRA Paper 18641, University Library of Munich, Germany.
  5. Natalya Ketenci, N., 2010. "The Feldstein Horioka Puzzle by groups of OECD members: the panel approach," MPRA Paper 25848, University Library of Munich, Germany.
  6. Saten Kumar & Don J. Webber & Scott Fargher, 2012. "Testing the validity of the Feldstein--Horioka puzzle for Australia," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(5), pages 599-605, February.
  7. Sami Ben Mim (ERUDITE) & Fatma Mabrouk (GREThA, CNRS, UMR 5113), 2011. "Remittances and economic growth: what channels of transmission? (In French)," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2011-28, Groupe de Recherche en Economie Théorique et Appliquée.
  8. Francesca Di Iorio & Stefano Fachin, 2012. "Savings and Investments in the OECD: a panel cointegration study with a new bootstrap test," DSS Empirical Economics and Econometrics Working Papers Series 2012/2, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  9. Solarin Sakiru Adebola & Jauhari Dahalan, 2012. "Capital Mobility: An Application of Savings-Investment Link for Tunisia," International Journal of Economics and Financial Issues, Econjournals, vol. 2(1), pages 1-11.
  10. Piotr Misztal, 2011. "The Feldstein-Horioka Hypothesis in Countries with Varied Levels of Economic Development," Contemporary Economics, University of Finance and Management in Warsaw, University of Finance and Management in Warsaw, vol. 5(2), June.

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