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Testing the validity of the Feldstein-Horioka puzzle for Australia

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Author Info
Saten Kumar (Department of Business Economics, Auckland University of Technology)
Scott Fargher (Department of Business Economics, Auckland University of Technology)
Don J. Webber () (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol)

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Abstract

This paper presents an investigation into the relationship between investment and savings in Australia over the period 1960-2007. Using four time series techniques our results reveal that the Feldstein-Horioka puzzle exists in a weak form with a lower saving retention coefficient. Granger Causality tests illustrate that savings Granger cause investment both in the short and long runs. Our results suggest Australia could effectively adopt policies that focus on increasing investment through increasing domestic savings

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File URL: http://carecon.org.uk/DPs/0911.pdf
File Format: application/pdf
File Function: First version, 2009
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Publisher Info
Paper provided by University of the West of England, Department of Economics in its series Discussion Papers with number 0911.

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Length: 13 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:uwe:wpaper:0911

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Web page: http://www.uwe.ac.uk/bbs/acad/econ/econ.shtml
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Related research
Keywords: Savings; investment; capital mobility;

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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References listed on IDEAS
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  1. Sinha, Tapen & Sinha, Dipendra, 2004. "The mother of all puzzles would not go away," Economics Letters, Elsevier, vol. 82(2), pages 259-267, February. [Downloadable!] (restricted)
  2. Obstfeld, Maurice, 1986. "Capital mobility in the world economy: Theory and measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 55-103, January. [Downloadable!] (restricted)
    Other versions:
  3. 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:
  4. Sathye, Milind, 2001. "X-efficiency in Australian banking: An empirical investigation," Journal of Banking & Finance, Elsevier, vol. 25(3), pages 613-630, March. [Downloadable!] (restricted)
  5. Jerry Coakley & Ana-Maria Fuertes & Fabio Spagnolo, 2004. "Is the Feldstein-Horioka Puzzle History?," Manchester School, University of Manchester, vol. 72(5), pages 569-590, 09. [Downloadable!] (restricted)
  6. Hussein, Khaled A., 1998. "International capital mobility in OECD countries: The Feldstein-Horioka 'puzzle' revisited," Economics Letters, Elsevier, vol. 59(2), pages 237-242, May. [Downloadable!] (restricted)
  7. Martin B. Schmidt, 2003. "Savings and investment in Australia," Applied Economics, Taylor and Francis Journals, vol. 35(1), pages 99-106, January. [Downloadable!] (restricted)
  8. Hoffmann, Mathias, 2004. "International capital mobility in the long run and the short run: can we still learn from saving-investment data?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 113-131, February. [Downloadable!] (restricted)
  9. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22. [Downloadable!]
    Other versions:
  10. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    Other versions:
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