Saving and investment causality: implications for financial integration in transition countries of Eastern Europe
Manuchehr Irandoust ()
Additional contact information
Manuchehr Irandoust: Kristianstad University
International Economics and Economic Policy, 2019, vol. 16, issue 2, No 6, 397-416
Abstract:
Abstract Numerous studies have been devoted to the Feldstein-Horioka puzzle. However, no consensus has been reached in the literature. This paper examines the causal relationship between domestic saving and investment rates in six transition economies (Estonia, Latvia, Lithuania, Ukraine, Belarus, and Russian Federation). Theoretically, the presence of any type of causal structure between these two series in a country implies that national capital markets are not open; hence capital flows are impeded. Therefore, the paper employs the bootstrap panel Granger causality approach that accounts for both cross-sectional dependence and slope heterogeneity across countries to determine the causal structure. The findings show that there is a causality between the series, thereby implying that capital is not perfectly mobile internationally in any of the countries under review, but it is more mobile in Estonia, Russian Federation, and Latvia than Lithuania, Belarus, and Ukraine. The underdevelopment of financial markets in these countries as well as the demand for foreign capital to finance domestic investment projects and the lack of adequate economic and financial reforms might have driven these results.
Keywords: Capital mobility; Saving; Investment; Eastern Europe; Causality (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://link.springer.com/10.1007/s10368-017-0390-6 Abstract (text/html)
Access to full text is restricted to subscribers.
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:kap:iecepo:v:16:y:2019:i:2:d:10.1007_s10368-017-0390-6
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10368/PS2
DOI: 10.1007/s10368-017-0390-6
Access Statistics for this article
International Economics and Economic Policy is currently edited by Paul J.J. Welfens, Holger C. Wolf, Christian Pierdzioch and Christian Richter
More articles in International Economics and Economic Policy from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().