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Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks

  • Rao, B. Bhaskara
  • Tamazian, Artur
  • Kumar, Saten

A systems GMM estimation method is used to estimate the Feldstein-Horioka equation from 1960-2007 with a panel of 12 OECD countries. It is found that the Feldstein-Horioka puzzle exists in a weaker form with a much reduced saving retention coefficient. The Bretton Woods agreement in particular has weakened the Feldstein-Horioka puzzle by significantly improving international capital mobility. In comparison the Maastricht agreement seems to have improved capital mobility only by a small magnitude. The Blundell and Bond approach systems GMM method and the structural break tests of Mancini-Griffoli and Pauwels are used in this paper.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15312.

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Date of creation: 19 May 2009
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Handle: RePEc:pra:mprapa:15312
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