This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Revisiting the Feldstein-Horioka Puzzle: An Institutional Sector View

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Bebczuk, Ricardo
Schmidt-Hebbel, Klaus

Additional information is available for the following registered author(s):

Abstract

Working on a unbalanced sample of OECD countries spanning the period 1970-2003, this paper contributes to the empirical literature on the Feldstein-Horioka puzzle by making three main innovations: First, it goes beyond the traditional national-level investment-saving equations to estimate, for the first time, regressions at the institutional sector level (households, corporations, and government). Second, it explores the implications of giving separate consideration to current account deficits and surpluses. Lastly, it uses advanced panel data techniques to deal with endogeneity and to distinguish long- and short-run effects. After discarding the influence of common factors, the conclusions are that: (i) The national Feldstein-Horioka coefficient is in the vicinity of 0.5, but sectoral coefficients are much lower and even insignificantly different from zero; (ii) Such positive and significant national coefficient would not reflect frictions in international credit markets but just a fiscal current account targeting policy; (iii) Nevertheless, when the sample is split into deficit and surplus years, a higher and significant correlation emerges for the former at the national, household, and corporate level, implying that credit imperfections still play a role for the private but not for the public sector. Equally noteworthy, household correlation is still positive and significant, yet lower, for surplus years; and (iv) Against the background of a unitary long-run coefficient to satisfy the intertemporal budget constraint, the long-run relationship is 0.75 for national data, 0.6 for the corporate sector, and marginally or non-significant at the household and government level.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/1802/
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1802.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: May 2006
Date of revision:
Handle: RePEc:pra:mprapa:1802

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords: International Capital Mobility Institutional Sectors Financial Constraints Current Account Targeting

Other versions of this item:

Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Coakley, Jerry & Kulasi, Farida, 1997. "Cointegration of long span saving and investment," Economics Letters, Elsevier, vol. 54(1), pages 1-6, January. [Downloadable!] (restricted)
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  3. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
    Other versions:
  4. Alan M. Taylor, 2002. "A Century of Current Account Dynamics," NBER Working Papers 8927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Iwamoto, Yasushi & van Wincoop, Eric, 2000. "Do Borders Matter? Evidence from Japanese Regional Net Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 241-69, February.
  6. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
    Other versions:
  7. Martin Feldstein & Charles Horioka, 1980. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Argimon, Isabel & Roldan, JoseMaria, 1994. "Saving, investment and international capital mobility in EC countries," European Economic Review, Elsevier, vol. 38(1), pages 59-67, January. [Downloadable!] (restricted)
  9. Calderon, Cesar & Schmidt-Hebbel, Klaus, 2003. "Macroeconomic policies and performance in Latin America," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 895-923, December. [Downloadable!] (restricted)
    Other versions:
  10. De Vita, Glauco & Abbott, Andrew, 2002. "Are saving and investment cointegrated? An ARDL bounds testing approach," Economics Letters, Elsevier, vol. 77(2), pages 293-299, October. [Downloadable!] (restricted)
  11. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March. [Downloadable!] (restricted)
    Other versions:
  12. Jos Jansen, W, 1996. "Estimating saving-investment correlations: evidence for OECD countries based on an error correction model," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 749-781, October. [Downloadable!] (restricted)
  13. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
    Other versions:
  14. Jérôme Hericourt & Mathilde Maurel, 2000. "The Feldstein-Horioka Puzzle Revisited: An “European-Regional” Perspective," William Davidson Institute Working Papers Series wp763, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  15. Loayza, Norman & Schmidt-Hebbel, Klaus & Serven, Luis, 2000. "What drives private saving around the world?," Policy Research Working Paper Series 2309, The World Bank. [Downloadable!]
  16. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 1999. "What Drives Private Saving Across the World?," Working Papers Central Bank of Chile 47, Central Bank of Chile. [Downloadable!]
    Other versions:
  17. Sachsida, Adolfo & Caetano, Marcelo Abi-Ramia, 2000. "The Feldstein-Horioka puzzle revisited," Economics Letters, Elsevier, vol. 68(1), pages 85-88, July. [Downloadable!] (restricted)
    Other versions:
  18. Anindya Banerjee & Paolo Zanghieri, 2003. "A New Look at the Feldstein-Horioka Puzzle using an Integrated Panel," Working Papers 2003-22, CEPII research center. [Downloadable!]
  19. repec:fth:prinin:455 is not listed on IDEAS
  20. Paul Cashin & C. John McDermott, 1998. "International Capital Flows and National Creditworthiness-Do the Fundamental Things Apply as Time Goes By?," IMF Working Papers 98/172, International Monetary Fund.
  21. Glick, Reuven & Rogoff, Kenneth, 1995. "Global versus country-specific productivity shocks and the current account," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 159-192, February. [Downloadable!] (restricted)
    Other versions:
  22. Serven, Luis, 2002. "Real exchange rate uncertainty and private investment in developing countries," Policy Research Working Paper Series 2823, The World Bank. [Downloadable!]
  23. Florian Pelgrin & Sebastian Schich, 2004. "National Saving-Investment Dynamics and International Capital Mobility," Working Papers 04-14, Bank of Canada. [Downloadable!]
Full references

Statistics
Access and download statistics

Did you know? It is the publishers that input data about their publications, as there is no staff at RePEc.

This page was last updated on 2008-11-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.