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A Time Series Approach to the Feldstein-Horioka Puzzle with Panel Data from the OECD Countries

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  • Kumar, Saten
  • Rao, B. Bhaskara

Abstract

The Pedroni method is used to estimate the Feldstein-Horioka equation from 1960-2007 with a panel of 13 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 the international capital mobility. In comparison the Maastricht agreement seems to have improved capital mobility only by a small magnitude. The structural break tests of Westerlund are used in this paper.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18464.

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Date of creation: 08 Nov 2009
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Handle: RePEc:pra:mprapa:18464

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Keywords: Feldstein-Horioka puzzle; Structural breaks; Bretton Woods and Maastricht agreements; International capital mobility;

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References

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  1. 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.
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  15. 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.
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Citations

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Cited by:
  1. Ketenci, Natalya, 2012. "The Feldstein–Horioka Puzzle and structural breaks: Evidence from EU members," Economic Modelling, Elsevier, vol. 29(2), pages 262-270.
  2. Rao, B. Bhaskara & Kumar, Saten, 2010. "Error-Correction Based Panel Estimates of the Demand for Money of Selected Asian Countries with the Extreme Bounds Analysis," MPRA Paper 27263, University Library of Munich, Germany.
  3. Ketenci, Natalya, 2013. "The Feldstein–Horioka puzzle in groupings of OECD members: A panel approach," Research in Economics, Elsevier, vol. 67(1), pages 76-87.
  4. 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.
  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.

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