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

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

A systems GMM estimation method is used to estimate the Feldstein-Horioka equation from 1960 to 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 seems to have 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 systems GMM method and structural break tests of Mancini-Griffoli and Pauwels are used in this paper.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 5 (September)
Pages: 1269-1273

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:5:p:1269-1273
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