Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks

B. Bhaskara Rao (), Artur Tamazian and Saten Kumar ()

MPRA Paper from University Library of Munich, Germany

Abstract: A systems GMM estimation method is used to estimate the Feldstein-Horioka equation from 1960-2007 with a panel of 12 OECD countries. It is found that the Feldstein-Horioka puzzle exists in a weaker form with a much reduced saving retention coefficient. The Bretton Woods agreement in particular has weakened the Feldstein-Horioka puzzle by significantly improving international capital mobility. In comparison the Maastricht agreement seems to have improved capital mobility only by a small magnitude. The Blundell and Bond approach systems GMM method and the structural break tests of Mancini-Griffoli and Pauwels are used in this paper.

Keywords: Feldstein-Horioka puzzle; Structural breaks; Effects of Bretton Woods and Maastricht agreements on international capital mobility. (search for similar items in EconPapers)
JEL-codes: C23 F21 C21 F36 (search for similar items in EconPapers)
Date: 2009-05-19
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Journal Article: Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks (2010)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:15312

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