VALIDITY OF F-H PUZZLE IN PAKISTAN ECONOMY: A TIME SERIES STUDY

Haris Masood (), Muhammad Waqas () and Masood Anwer
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Haris Masood: Assistant Professor, Institute of Business and Technology
Muhammad Waqas: Lecturer Economics Institute of Business and Technology
Masood Anwer: Director ORIC, Institute of Business and Technology

IBT Journal of Business Studies (JBS), 2017, vol. 13, issue 1, 89-96

Abstract: PurposeThe objective of this paper is to examine the validity of FH puzzle in the context of Pakistan.In this study the FeldsteinHorioko puzzle investigated in Pakistan which states that the existence of relationship between saving and investment is the indication of capital immobility.MethodologyThe data of gross domestic product saving, capital formation and current account from 1980 to 2016 collected from State Bank of Pakistan, IMF outlook data base and Economic Survey of Pakistan.The ADF and PP test used to find out the stationarity of the variables.Famous Johansen cointegration used to check the long run relationship between saving and investment and between current account and investment.FindingsThe results of unit root test indicate that all the variables are stationary at their first difference.The empirical results of cointegration test shows that there is no long run relation exist between saving and investment and long run relationship exist between current account and investment which does not support the findings of FH puzzle and shows that capital is perfectly mobile in case of Pakistani economy

Keywords: F-H Puzzle; Feldstein-Horioko puzzle; cointegration (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:aib:ibtjbs:v:13:y:2017:i:1:p:89-96

DOI: 10.46745/ilma.ibtjbs.2017.131.7

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