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The Feldstein-Horioka puzzle in South American countries:a time-varying approach

Fábio Gomes, Afonso Ferreira () and Jaime de Jesus Filho

Applied Economics Letters, 2008, vol. 15, issue 11, 859-863

Abstract: Inasmuch as the investment-savings correlation is related to capital immobility and each country has specific and time-varying capital account liberalization and financial deregulation processes, we might not expect a constant and identical correlation for a group of countries. We performed both a constant (OLS) and a time-varying (Kalman filter) estimation of the investment-savings coefficient for Argentina, Brazil and Chile. As expected, the time-varying model presented a better fit, but our findings suggested that the investment-savings correlation is a misleading measure of capital mobility.

Date: 2008
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DOI: 10.1080/13504850600949129

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Handle: RePEc:taf:apeclt:v:15:y:2008:i:11:p:859-863