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A functional coefficient model view of the Feldstein-Horioka puzzle

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  • Herwartz, Helmut
  • Xu, Fang
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Abstract

What does the saving-investment (SI) relation really measure and how should the (SI) relation be measured? These are two of the most discussed issues triggered by the so called Feldstein-Horioka puzzle. Based on panel data we introduce a new variant of functional coefficient models that allow to separate long and short to medium run parameter dependence. We apply the latter to uncover the determinants of the SI relation. Macroeconomic state variables such as openness, the age dependency ratio, government current and consumption expenditures are found to affect the SI relation significantly in the long run. --

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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,14.

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Date of creation: 2007
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Handle: RePEc:zbw:cauewp:5613

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Keywords: Saving-investment relation; Feldstein-Horioka puzzle; functional coefficient models;

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Cited by:
  1. repec:hal:journl:hal-00975545 is not listed on IDEAS
  2. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2014. "The Great Shift : Macroeconomic projections For the World Economy at the 2050 Horizon," PSE - G-MOND WORKING PAPERS, HAL hal-00962464, HAL.
  3. Ketenci, Natalya, 2013. "The Feldstein–Horioka puzzle in groupings of OECD members: A panel approach," Research in Economics, Elsevier, Elsevier, vol. 67(1), pages 76-87.
  4. Ketenci, Natalya, 2012. "The Feldstein–Horioka Puzzle and structural breaks: Evidence from EU members," Economic Modelling, Elsevier, Elsevier, vol. 29(2), pages 262-270.
  5. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2013. "Modelling the world economy at the 2050 horizon," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 21(4), pages 617-654, October.
  6. Chu, Kam Hon, 2012. "The Feldstein-Horioka Puzzle and Spurious Ratio Correlation," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(2), pages 292-309.
  7. 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, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome 2012/2, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  8. Ketenci, Natalya, 2014. "The Feldstein –Horioka Puzzle and structural breaks: Evidence from the largest countries of Asia," MPRA Paper 54660, University Library of Munich, Germany.
  9. Jean Fouré & Agnès Bénassy-Quéré & Lionel Fontagné, 2010. "The World Economy in 2050: a Tentative Picture," Working Papers 2010-27, CEPII research center.

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