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

B. Rao, Artur Tamazian and Saten Kumar

Economic Modelling, 2010, vol. 27, issue 5, 1269-1273

Abstract: A systems GMM estimation method is used to estimate the Feldstein-Horioka equation from 1960 to 2007 with a panel of 13 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 seems to have 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 systems GMM method and 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)
Date: 2010
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