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Feldstein-Horioka Paradox Revisited

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  • Hiroshi Fujiki
  • Yukinobu Kitamura

Abstract

A central concern in the field of international finance is always capital mobility. Feldstein-Horioka(1980) propose a simple test for international capital mobility and obtain a sign of very low capital mobility. Their interesting result is often described as the Feldstein-Horioka paradox. This paper re-examines their study using panel data analysis. Following the standard model selection procedure, preferred estimators of the elasticity of domestic investment-GDP ratio on domestic saving-GDP ratio are always significantly lower than one. In the light of our results, the Feldstein-Horioka paradox turns out to be not so robust because of cross country heterogeneities.

Suggested Citation

  • Hiroshi Fujiki & Yukinobu Kitamura, 1994. "Feldstein-Horioka Paradox Revisited," Discussion Paper Series a298, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hituec:a298
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    Cited by:

    1. Yukinobu Kitamura & Hiroshi Fujiki, 2004. "The Big Mac Standard: A statistical Illustration," Economics Bulletin, AccessEcon, vol. 6(13), pages 1-18.
    2. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.

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