IDEAS home Printed from https://ideas.repec.org/a/eme/jespps/v34y2007i3p194-210.html
   My bibliography  Save this article

The Feldstein-Horioka puzzle in an ARIMA framework

Author

Listed:
  • Apostolos Serletis
  • Periklis Gogas

Abstract

Purpose - To test the Feldstein-Horioka hypothesis that the investment-to-output ratio moves one-for-one with the saving-to-output ratio, suggesting international capital mobility. Design/methodology/approach - The paper uses the econometric framework developed by Fisher and Seater, interpreting the Feldstein-Horioka hypothesis as a long-run phenomenon, and paying particular attention to the integration properties of the data, since meaningful tests critically depend on these properties. The paper also investigates the power of the long-horizon regression tests, using the inverse power function of Andrews. Findings - The paper tests the Feldstein-Horioka hypothesis for 15 European countries, as well as for the USA and Japan, using annual data for the period from 1960 to 2002. Evidence is found against the Feldstein and Horioka hypothesis of low international capital mobility. Originality/value - Although the findings are in contrast to those of Feldstein and Horioka, they are consistent with neoclassical growth theory according to which there is no reason to expect a relation between saving and investment if there are no barriers to capital movements.

Suggested Citation

  • Apostolos Serletis & Periklis Gogas, 2007. "The Feldstein-Horioka puzzle in an ARIMA framework," Journal of Economic Studies, Emerald Group Publishing, vol. 34(3), pages 194-210, August.
  • Handle: RePEc:eme:jespps:v:34:y:2007:i:3:p:194-210
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/01443580710772768?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohsen Bahmani-Oskooee & Rajarshi Mitra, 2009. "The J-Curve at the industry level: evidence from U.S.-India trade," Economics Bulletin, AccessEcon, vol. 29(2), pages 1520-1529.
    2. Chu, Kam Hon, 2012. "The Feldstein-Horioka Puzzle and Spurious Ratio Correlation," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 292-309.
    3. Mohsen Bahmani-Oskooee & Scott W. Hegerty & Altin Tanku, 2010. "The Black-Market Exchange Rate Versus The Official Rate: Which Rate Fosters The Adjustment Speed In The Monetarist Model?," Manchester School, University of Manchester, vol. 78(6), pages 725-738, December.
    4. Mohsen Bahmani-Oskooee & Marzieh Bolhasani, 2011. "How Sensitive is U.S.-Canadian Trade to the Exchange Rate: Evidence from Industry Data," Open Economies Review, Springer, vol. 22(1), pages 53-91, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:34:y:2007:i:3:p:194-210. 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: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.