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A simple test of the role of foreign direct investment in the Feldstein- Horioka puzzle

  • G. Rossini
  • P. Zanghieri

The purpose of this article is to test the dependency of domestic investment on domestic saving in the Feldstein-Horioka spirit. Its innovation is to use a definition of investment that does not include foreign direct investment. It does so since FDI should not be considered in the intertemporal budget constraint of a recipient country and therefore should not be related to domestic saving in a meaningful way. Once it adopts, as the dependent variable, pure domestic investment the result is a weakened relationship between internal saving and investment.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 10 (2003)
Issue (Month): 1 ()
Pages: 39-41

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Handle: RePEc:taf:apeclt:v:10:y:2003:i:1:p:39-41
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  1. Adolfo Sachsida & Marcelo Abi-Ramia Caetano, 1999. "The Feldstein-Horioka Puzzle Revisited," International Trade 9904001, EconWPA.
  2. Hussein, Khaled A., 1998. "International capital mobility in OECD countries: The Feldstein-Horioka 'puzzle' revisited," Economics Letters, Elsevier, vol. 59(2), pages 237-242, May.
  3. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  4. Jansen, W. Jos, 1997. "Can the intertemporal budget constraint explain the Feldstein-Horioka puzzle?," Economics Letters, Elsevier, vol. 56(1), pages 77-83, September.
  5. World Bank, 2000. "World Development Indicators 2000," World Bank Publications, The World Bank, number 13828.
  6. Maurice Obstfeld & Kenneth Rogoff & Ben Bernanke & Kenneth Rogoff, . "The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?," Working Paper 32326, Harvard University OpenScholar.
  7. 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.
  8. 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.
  9. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  10. Golub, Stephen S., 1990. "International capital mobility: net versus gross stocks and flows," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 424-439, December.
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