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Domestic Capital Mobility: A Panel Data Approach

  • Nagayasu, Jun

This paper analyzes capital mobility within Japan based on the consumption-based correlation method developed by Obstfeld (1994). This thoery suggests that consumption in one region is closely related to that in other regions if the capital market is open. We test this theoretical implication in the panel data context using the dynamic factor model which enables us to estimate unobservable common factors. Then we provide evidence of perfect capital mobility and capital integration having advanced rapidly between 1965 and 1975. Furthermore, the common factor is found to affect regional consumption heterogeneously and to be closely associated with stock returns.

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File URL: http://mpra.ub.uni-muenchen.de/27720/1/MPRA_paper_27720.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27720.

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Date of creation: 01 Nov 2010
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Handle: RePEc:pra:mprapa:27720
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  1. Dekle, Robert, 1996. "Saving-investment associations and capital mobility On the evidence from Japanese regional data," Journal of International Economics, Elsevier, vol. 41(1-2), pages 53-72, August.
  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.
  3. Pesaran, M. Hashem, 2004. "General Diagnostic Tests for Cross Section Dependence in Panels," IZA Discussion Papers 1240, Institute for the Study of Labor (IZA).
  4. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August.
  5. Nagayasu, Jun, 2010. "Regional Inflation (Price) Behaviors: Heterogeneity and Convergence," MPRA Paper 25430, University Library of Munich, Germany.
  6. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," International Trade 0012003, EconWPA.
  7. Maurice Obstfeld., 1993. "Are Industrial-Country Consumption Risks Globally Diversified?," Center for International and Development Economics Research (CIDER) Working Papers C93-014, University of California at Berkeley.
  8. Toshiaki Tachibanaki, 2005. "Confronting Income Inequality in Japan: A Comparative Analysis of Causes, Consequences, and Reform," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201585, June.
  9. Yu, Ip-Wing & Fung, Kang-Por & Tam, Chi-Sang, 2010. "Assessing financial market integration in Asia - Equity markets," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2874-2885, December.
  10. Kim, Soyoung & Kim, Sunghyun H. & Wang, Yunjong, 2006. "Financial integration and consumption risk sharing in East Asia," Japan and the World Economy, Elsevier, vol. 18(2), pages 143-157, March.
  11. Frees, Edward W., 1995. "Assessing cross-sectional correlation in panel data," Journal of Econometrics, Elsevier, vol. 69(2), pages 393-414, October.
  12. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
  13. Yamori, Nobuyoshi, 1995. "The relationship between domestic savings and investment: The Feldstein-Horioka test using Japanese regional data," Economics Letters, Elsevier, vol. 48(3-4), pages 361-366, June.
  14. Sinha, Tapen & Sinha, Dipendra, 2004. "The mother of all puzzles would not go away," Economics Letters, Elsevier, vol. 82(2), pages 259-267, February.
  15. Corbin, Annie, 2001. "Country specific effect in the Feldstein-Horioka paradox: a panel data analysis," Economics Letters, Elsevier, vol. 72(3), pages 297-302, September.
  16. Krol, Robert, 1996. "International capital mobility: evidence from panel data," Journal of International Money and Finance, Elsevier, vol. 15(3), pages 467-474, June.
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