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The Feldstein Horioka Puzzle by groups of OECD members: the panel approach

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  • Natalya Ketenci, N.

Abstract

This paper investigates investment savings relationships in 26 OECD countries and how these relationships change when countries in the considered panel vary. Therefore panel estimations using annual data for the period 1970-2008 are made for different groups of developed countries, such as the OECD, EU15, NAFTA and G7. Additionally, this paper examines changes in investment saving relationships in groups of developed countries taking into account the presence of structural shifts in countries where they exist. Recent panel techniques are employed in this study to examine investment savings relationships and to estimate saving retention coefficients. The empirical findings reveal that the Feldstein-Horioka puzzle exists only in the panel of G7 countries where the saving-retention coefficient is estimated at the level 0.754 and 0.864 for the full sample of G7 countries and for stable countries, respectively. The estimated saving-retention coefficient for the G7 group of unstable appear at the 0.482 level, indicating a higher level of capital mobility in unstable countries compared to stable ones. This conclusion is supported by estimations for OECD and EU15 countries.

Suggested Citation

  • Natalya Ketenci, N., 2010. "The Feldstein Horioka Puzzle by groups of OECD members: the panel approach," MPRA Paper 25848, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:25848
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    Cited by:

    1. Piotr Misztal, 2011. "The Feldstein-Horioka Hypothesis in Countries with Varied Levels of Economic Development," Contemporary Economics, University of Finance and Management in Warsaw, vol. 5(2), June.
    2. Despina Petreska & Nikica Mojsoska-Blazevski, 2013. "The Feldstein-Horioka Puzzle And Transition Economies," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(197), pages 23-46, April – J.

    More about this item

    Keywords

    Feldstein-Horioka puzzle; capital mobility; structural breaks; panel estimations; OECD.;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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