Exchange rate regimes, saving glut and the Feldstein–Horioka puzzle: The East Asian experience

Seçil Kaya-Bahçe and Erdal Özmen

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 11, 2561-2564

Abstract: This paper investigates whether the recent experience of the emerging East Asian countries with current account surpluses is consistent with the “saving glut” hypothesis and the Feldstein and Horioka puzzle. The evidence suggests that the saving retention coefficients declined substantially in most of the countries after an endogenous break date coinciding with a major exchange rate regime change with the 1997–1998 crisis. Exchange rate flexibility appears to be enhancing financial integration. The results are consistent with an “investment slump” explanation rather than the “saving glut” postulation.

Keywords: Capital mobility; Current account imbalance; East Asia; Exchange rate regimes; Parameter stability; Structural breaks (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:11:p:2561-2564

DOI: 10.1016/j.physa.2008.01.016

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