EconPapers    
Economics at your fingertips  
 

Has the Feldstein-Horioka puzzle waned? Evidence from time series and dynamic panel data analysis

Santosh Kumar Dash

Economic Modelling, 2019, vol. 83, issue C, 256-269

Abstract: This objective of this paper is to examine the Feldstein-Harioka puzzle by using both time series analysis that accommodates structural breaks, and dynamic panel error-correction method. Our sample consists of 118 countries over the period 1981–2013. Results from ARDL model suggest that long-run capital is highly mobile in high-income countries (HIC), moderately mobile for both middle- and low-income countries. Our finding of the low long-run saving coefficient for HICs shows that failure to account for a structural break may overstate the long-run saving coefficient. Findings from the pooled mean group estimators suggest that capital is moderately mobile in the middle-income countries, and highly immobile in the high- and low-income countries in the long run. Our findings highlight that ignoring structural break, the type of data (time series/panel), and econometric method used can affect the conclusion about capital mobility. The adjustment coefficient in the time series analysis is comparatively higher than the panel data analysis. We also test whether country size and openness affect the saving–investment correlation. While the effect of country size on the saving coefficient is mixed, the saving estimate is found to be a function of the degree of openness. We also discuss policy implications of our findings on the current account sustainability.

Keywords: Feldstein–Horioka puzzle; Structural break; Capital mobility; Panel ARDL; Pooled mean group estimator; CIPS test; Panel unit root test (search for similar items in EconPapers)
JEL-codes: C23 F31 F36 O16 O57 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999317313937
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:83:y:2019:i:c:p:256-269

DOI: 10.1016/j.econmod.2019.02.015

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-10-03
Handle: RePEc:eee:ecmode:v:83:y:2019:i:c:p:256-269