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The Feldstein-Horioka Puzzle: New Evidence for the United States

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  • N.R.Vasudeva Murthy

Abstract

Employing a battery of unit root and cointegration tests, using the U.S. annual data on saving and investment rates over the period 1950-2002, this paper presents new econometric evidence to show that in the United States, the Feldstein-Horioka puzzle does not hold valid. This finding is consistent with a high degree of capital mobility that the United States has been experiencing in recent years due to the increasing integration of financial markets caused by the Internet diffusion and deregulation. The results are robust to robust to application of various cointegration techniques and do not differ for level variables.

Suggested Citation

  • N.R.Vasudeva Murthy, 2005. "The Feldstein-Horioka Puzzle: New Evidence for the United States," The IUP Journal of Applied Economics, IUP Publications, vol. 0(1), pages 7-12, January.
    • Handle: RePEc:icf:icfjae:v:06:y:2005:i:1:p:7-12
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