Time-varying saving–investment relationship and the Feldstein–Horioka puzzle

Wei Ma and Haiqi Li

Economic Modelling, 2016, vol. 53, issue C, 166-178

Abstract: Numerous studies have been devoted to the Feldstein–Horioka puzzle. However, no consensus has been reached in the literature. This paper examines the dynamic saving–investment relationship by using a time varying cointegration model. The saving-retention coefficients are found to be high for developed economies, but low for less developed economies, which could be explained by the difference of the long-run solvency constraint between developed and less developed economies. While more evidence is found for time-varying cointegration using quarterly data, the magnitudes of saving retention coefficients have no substantial difference from those of annual data.

Keywords: Feldstein–Horioka puzzle; Saving-retention coefficient; Long-run solvency constraint; Time-varying cointegration (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:53:y:2016:i:c:p:166-178

DOI: 10.1016/j.econmod.2015.11.013

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