IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

A functional coefficient model view of the Feldstein-Horioka puzzle

  • Herwartz, H.
  • Xu, F.
Registered author(s):

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 allows to separate long and short to medium run parameter dependence. The new modeling framework is applied 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0261-5606(08)00164-2
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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

Volume (Year): 29 (2010)
Issue (Month): 1 (February)
Pages: 37-54

as
in new window

Handle: RePEc:eee:jimfin:v:29:y:2010:i:1:p:37-54
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ravn, Morten O & Uhlig, Harald, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CEPR Discussion Papers 2858, C.E.P.R. Discussion Papers.
  2. 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.
  3. Kasuga, Hidefumi, 2004. "Saving-investment correlations in developing countries," Economics Letters, Elsevier, vol. 83(3), pages 371-376, June.
  4. Gian-Maria Milesi-Ferretti & Assaf Razin, 1997. "Sharp Reductions in Current Account Deficits: An Empirical Analysis," IMF Working Papers 97/168, International Monetary Fund.
  5. W. Jos Jansen, 2003. "International Capital Mobility: Evidence from Panel Data," International Finance 0310003, EconWPA.
  6. Milesi-Ferretti, G.M. & Razin, A., 1997. "Origins of Sharp Reductions in Current Account deficits: An Empirical Analysis," Papers 25-97, Tel Aviv.
  7. Gian Maria Milesi-Ferrett & Assaf Razin, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," NBER Working Papers 6620, National Bureau of Economic Research, Inc.
  8. Paul R. Masson & Tamim Bayoumi & Hossein Samiei, 1995. "International Evidenceon the Determinants of Private Saving," IMF Working Papers 95/51, International Monetary Fund.
  9. Tsung-wu Ho, 2002. "A panel cointegration approach to the investment-saving correlation," Empirical Economics, Springer, vol. 27(1), pages 91-100.
  10. Zongwu Cai & Jianqing Fan & Qiwei Yao, 2000. "Functional-coefficient regression models for nonlinear time series," LSE Research Online Documents on Economics 6314, London School of Economics and Political Science, LSE Library.
  11. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412 National Bureau of Economic Research, Inc.
  12. Ramon Moreno, 1994. "Saving-investment dynamics and capital mobility in the U.S. and Japan," Pacific Basin Working Paper Series 94-05, Federal Reserve Bank of San Francisco.
  13. Lawrence H. Summers, 1986. "Tax Policy and International Competitiveness," NBER Working Papers 2007, National Bureau of Economic Research, Inc.
  14. Jansen, W. Jos, 1997. "Can the intertemporal budget constraint explain the Feldstein-Horioka puzzle?," Economics Letters, Elsevier, vol. 56(1), pages 77-83, September.
  15. Herwartz, Helmut & Xu, Fang, 2007. "A new approach to bootstrap inference in functional coefficient models," Economics Working Papers 2007,15, Christian-Albrechts-University of Kiel, Department of Economics.
  16. Ozmen, Erdal & Parmaksiz, Kagan, 2003. "Policy regime change and the Feldstein-Horioka puzzle: the UK evidence," Journal of Policy Modeling, Elsevier, vol. 25(2), pages 137-149, February.
  17. Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc.
  18. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
  19. Florian Pelgrin & Sebastian Schich, 2004. "National Saving-Investment Dynamics and International Capital Mobility," Staff Working Papers 04-14, Bank of Canada.
  20. Gulley, O. David, 1992. "Are saving and investment cointegrated? : Another look at the data," Economics Letters, Elsevier, vol. 39(1), pages 55-58, May.
  21. De Vita, Glauco & Abbott, Andrew, 2002. "Are saving and investment cointegrated? An ARDL bounds testing approach," Economics Letters, Elsevier, vol. 77(2), pages 293-299, October.
  22. Helmut Herwartz & Fang Xu, 2008. "REVIEWING THE SUSTAINABILITY/STATIONARITY OF CURRENT ACCOUNT IMBALANCES WITH TESTS FOR BOUNDED INTEGRATION," Manchester School, University of Manchester, vol. 76(3), pages 267-278, 06.
  23. Jansen, W Jos & Schulze, Gunther G, 1996. "Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 116-32, January.
  24. Taylor, Alan M., 2002. "A century of current account dynamics," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 725-748, November.
  25. W. Jansen, 1998. "Interpreting Saving-Investment Correlations," Open Economies Review, Springer, vol. 9(3), pages 207-219, July.
  26. Lori Leachman, 1991. "Saving, investment, and capital mobility among OECD countries," Open Economies Review, Springer, vol. 2(2), pages 137-163, June.
  27. Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? a Cross-Sectional and Panel Approach," IMF Working Papers 96/58, International Monetary Fund.
  28. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
  29. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
  30. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  31. Adolfo Sachsida & Marcelo Abi-Ramia Caetano, 1999. "The Feldstein-Horioka Puzzle Revisited," International Trade 9904001, EconWPA.
  32. B. Douglas Bernheim, 1987. "Ricardian Equivalence: An Evaluation of Theory and Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 263-316 National Bureau of Economic Research, Inc.
  33. 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.
  34. Sinha, Tapen & Sinha, Dipendra, 2004. "The mother of all puzzles would not go away," Economics Letters, Elsevier, vol. 82(2), pages 259-267, February.
  35. Sinn, Stefan, 1992. "Saving-Investment Correlations and Capital Mobility: On the Evidence from Annual Data," Economic Journal, Royal Economic Society, vol. 102(414), pages 1162-70, September.
  36. Andrew J. Abbott & Glauco De Vita, 2003. "Another Piece in the Feldstein--Horioka Puzzle," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(1), pages 69-89, February.
  37. Eijffinger, S.C.W., 1995. "The quantity approach to financial integration : The Feldstein-Horioka criterion revisited," Other publications TiSEM c03b04b7-a993-4cc0-b9fc-4, Tilburg University, School of Economics and Management.
  38. Maurice Obstfeld, 1985. "Capital Mobility in the World Economy: Theory and Measurement," NBER Working Papers 1692, National Bureau of Economic Research, Inc.
  39. Alan M. Taylor, 1997. "Argentina and the World Capital Market: Saving, Investment, and International Capital Mobility in the Twentieth Century," NBER Working Papers 6302, National Bureau of Economic Research, Inc.
  40. Jakob Haan & Clemens Siermann, 1994. "Saving, investment, and capital mobility: A comment on Leachman," Open Economies Review, Springer, vol. 5(1), pages 5-17, March.
  41. Frankel, Jeffrey A, 1992. "Measuring International Capital Mobility: A Review," American Economic Review, American Economic Association, vol. 82(2), pages 197-202, May.
  42. AmirKhalkhali, Saleh & Dar, Atul & AmirKhalkhali, Samad, 2003. "Saving-investment correlations, capital mobility and crowding out: some further results," Economic Modelling, Elsevier, vol. 20(6), pages 1137-1149, December.
  43. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
  44. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  45. Coakley, Jerry & Kulasi, Farida & Smith, Ron, 1998. "The Feldstein-Horioka Puzzle and Capital Mobility: A Review," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(2), pages 169-88, April.
  46. Martin B. Schmidt, 2001. "Savings and Investment: Some International Perspectives," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 446-456, October.
  47. Alan M. Taylor, 1996. "International Capital Mobility in History: The Saving-Investment Relationship," NBER Working Papers 5743, National Bureau of Economic Research, Inc.
  48. Erdal Ozmen & Kağan Parmaksiz, 2003. "Exchange rate regimes and the Feldstein-Horioka puzzle: the French evidence," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 217-222.
  49. Coakley, Jerry & Kulasi, Farida & Smith, Ron, 1996. "Current Account Solvency and the Feldstein-Horioka Puzzle," Economic Journal, Royal Economic Society, vol. 106(436), pages 620-27, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:29:y:2010:i:1:p:37-54. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.