The Feldstein-Horioka Hypothesis: Co-Integration and Causality Results for Selected Countries

Santiago Grullon

Quarterly Journal of Business Studies, 2016, vol. 2, issue 3, 134-142

Abstract: This study investigates the validity of the Feldstein-Horioka hypothesis, which suggests that with perfect world capital mobility there should be no correlation between domestic savings and domestic investment, for the Bahamas, Belize, Bolivia, Nicaragua, and Panama. Results from ‘bounds’ test for co-integration for all five countries confirm the presence of a long-run association between domestic savings rates and domestic investment rates, and thus failing to support the Feldstein-Horioka theory. However, Pairwise Granger tests for the first four countries do not show any causal linkages between domestic savings and domestic investment and in the case of Panama the evidence shows bi-directional causality between the two variables.

Keywords: Feldstein-Horioka hypothesis; domestic savings; domestic investment; ‘bounds’ test for co-integration; Granger Pairwise causality (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://rassweb.org/admin/pages/ResearchPapers/Paper%202_1495914533.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rss:jnljbs:v2i3p2

Access Statistics for this article

More articles in Quarterly Journal of Business Studies from Research Academy of Social Sciences
Bibliographic data for series maintained by Danish Khalil ().