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Role of foreign direct investment in estimating capital mobility: a reappraisal of Feldstein-Horioka puzzle


  • Javed Younas


As investment by nonresidents is not subject to inter-temporal budget constraint of the recipient country, it may not belong to Feldstein-Horioka equation. This article finds that capital mobility is remarkably high in both developed and developing countries when Foreign Direct Investment (FDI) is excluded from domestic investment. Moreover, economic openness and financial markets' liberalization are also found to have increased the degree of capital mobility.

Suggested Citation

  • Javed Younas, 2011. "Role of foreign direct investment in estimating capital mobility: a reappraisal of Feldstein-Horioka puzzle," Applied Economics Letters, Taylor & Francis Journals, vol. 18(12), pages 1133-1137.
  • Handle: RePEc:taf:apeclt:v:18:y:2011:i:12:p:1133-1137 DOI: 10.1080/13504851.2010.526569

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    References listed on IDEAS

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    Cited by:

    1. Henrik Egbert & Nadeem Naqvi, 2011. "Market-dependent Production Set," MAGKS Papers on Economics 201145, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Annageldy Arazmuradov, 2012. "Foreign Aid, Foreign Direct Investment, and Domestic Investment Nexus in Landlocked Economies of Central Asia," Economic Research Guardian, Weissberg Publishing, vol. 2(1), pages 129-151, May.

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