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A Time Series Approach to the Feldstein-Horioka Puzzle with Panel Data from the OECD Countries

  • Kumar, Saten
  • Rao, B. Bhaskara

The Pedroni method is used to estimate the Feldstein-Horioka equation from 1960-2007 with a panel of 13 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 the international capital mobility. In comparison the Maastricht agreement seems to have improved capital mobility only by a small magnitude. The structural break tests of Westerlund are used in this paper.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18464.

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Date of creation: 08 Nov 2009
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Handle: RePEc:pra:mprapa:18464
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  8. Di Iorio, Francesca & Fachin, Stefano, 2007. "Testing for Breaks in Cointegrated Panels - with an Application to the Feldstein-Horioka Puzzle," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-23.
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