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The Feldstein-Horioka Puzzle: a Panel SmoothTransition Regression Approach

  • Julien Fouquau

    (LEO - Laboratoire d'économie d'Orleans - CNRS - UO - Université d'Orléans)

  • Christophe Hurlin


    (LEO - Laboratoire d'économie d'Orleans - CNRS - UO - Université d'Orléans)

  • Isabelle Rabaud

    (LEO - Laboratoire d'économie d'Orleans - CNRS - UO - Université d'Orléans)

This paper proposes an original framework to determine the relative influence of fivefactors on the Feldstein and Horioka result of OECD countries with a strong saving-investment association. Based on panel threshold regression models, we establishcountry-specific and time-specific saving retention coefficients for 24 OECD coun-tries over the period 1960-2000. These coefficients are assumed to change smoothly,as a function of five threshold variables, considered as the most important in theliterature devoted to the Feldstein and Horioka puzzle. The results show that; de-gree of openness, country size and current account to GDP ratios have the greatestinfluence on the investment-saving relationship.

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Paper provided by HAL in its series Working Papers with number halshs-00156688.

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Date of creation: 03 Aug 2007
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Handle: RePEc:hal:wpaper:halshs-00156688
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