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Capital mobility in saving and investment: A time-varying coefficients approach

  • Evans, Paul
  • Kim, Bong-Han
  • Oh, Keun-Yeob

This paper uses a model with time-varying coefficients in order to track changes in Feldstein-Horioka saving-retention coefficients over time. To the extent that such coefficients measure international capital mobility, the main empirical findings are as follows. First, the stability of the saving-retention coefficient is strongly rejected. Second, capital has long been perfectly mobile in Canada. Third, capital mobility has never been high in the United States. Fourth, capital was more mobile in Japan and the United Kingdom at the turn of the 20th century than it has been during the postwar period. Capital mobility has risen in Argentina, Italy and Sweden since around 1970. Finally, capital mobility for most of the countries considered has not monotonically increased during the postwar period.

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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 27 (2008)
Issue (Month): 5 (September)
Pages: 806-815

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Handle: RePEc:eee:jimfin:v:27:y:2008:i:5:p:806-815
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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  1. Martin Feldstein & Philippe Bacchetta, 1991. "National Saving and International Investment," NBER Chapters, in: National Saving and Economic Performance, pages 201-226 National Bureau of Economic Research, Inc.
  2. Park, Joon Y. & Hahn, Sang B., 1999. "Cointegrating Regressions With Time Varying Coefficients," Econometric Theory, Cambridge University Press, vol. 15(05), pages 664-703, October.
  3. Park, Joon Y, 1992. "Canonical Cointegrating Regressions," Econometrica, Econometric Society, vol. 60(1), pages 119-43, January.
  4. Hansen, Bruce E, 1992. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 321-35, July.
  5. Michael Dooley & Jeffrey Frankel & Donald J. Mathieson, 1987. "International Capital Mobility: What Do Saving-Investment Correlations Tell Us?," IMF Staff Papers, Palgrave Macmillan, vol. 34(3), pages 503-530, September.
  6. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June.
  7. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  8. Coakley, Jerry & Kulasi, Farida, 1997. "Cointegration of long span saving and investment," Economics Letters, Elsevier, vol. 54(1), pages 1-6, January.
  9. Maurice Obstfeld, 1985. "Capital Mobility in the World Economy: Theory and Measurement," NBER Working Papers 1692, National Bureau of Economic Research, Inc.
  10. Sam Y. Cross, 1998. "All about the foreign exchange market in the United States," Monograph, Federal Reserve Bank of New York, number 1998aatfemitu.
  11. Keun-Yeob Oh & Bong-Han Kim & Hong-Kee Kim & Byung-Chul Ahn, 1999. "Savings-investment cointegration in panel data," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 477-480.
  12. Sergio L. Schmukler & Graciela Laura Kaminsky, 2003. "Short-Run Pain, Long-Run Gain; The Effects of Financial Liberalization," IMF Working Papers 03/34, International Monetary Fund.
  13. Alan M. Taylor, 1996. "International Capital Mobility in History: The Saving-Investment Relationship," NBER Working Papers 5743, National Bureau of Economic Research, Inc.
  14. 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.
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