Domestic Capital Mobility: A Panel Data Approach

Jun Nagayasu

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Capital mobility; Dynamic factor model (search for similar items in EconPapers)
JEL-codes: C33 E21 F36 (search for similar items in EconPapers)
Date: 2010-11-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:27720

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