A functional coefficient model view of the Feldstein-Horioka puzzle

Helmut Herwartz and Fang Xu

No 2007-14, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: What does the saving-investment (SI) relation really measure and how should the (SI) relation be measured? These are two of the most discussed issues triggered by the so called Feldstein-Horioka puzzle. Based on panel data we introduce a new variant of functional coefficient models that allow to separate long and short to medium run parameter dependence. We apply the latter to uncover the determinants of the SI relation. Macroeconomic state variables such as openness, the age dependency ratio, government current and consumption expenditures are found to affect the SI relation significantly in the long run.

Keywords: Saving-investment relation; Feldstein-Horioka puzzle; functional coefficient models (search for similar items in EconPapers)
JEL-codes: C14 C23 E21 E22 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: A functional coefficient model view of the Feldstein-Horioka puzzle (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:5613

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