FH Puzzle in the Eurozone: A time-varying analysis Preliminary Draft
Mariam Camarero (),
Juan Sapena and
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Juan Sapena: Catholic University of Valencia, Faculty of Economics and Business. 34 Calle Corona, Valencia, Spain
No 1813, Working Papers from Department of Applied Economics II, Universidad de Valencia
The aim of this paper is to reexamine the Feldstein-Horioka puzzle in a dynamic framework. We estimate a time-varying saving-investment relationship for a group of 17 countries panel, paying special attention to Eurozone members but including some relevant OECD countries as well for the period 1970-2016. The main advantage of our empirical approach is that it captures the dynamics of the FH coe_cient, highly consistent with increased _nancial integration. Global risk and country size are relevant elements to unpuzzle the savings-investment correlation. The inclusion of time-varying estimates reveal certain heterogeneity among EMU countries on the way and the circumstances under which their domestic investment would be constrained by savings retention.
Keywords: Feldstein-Horioka puzzle; panel unit root tests; multiple structural breaks; Kalman Filter; Time varying parameters (search for similar items in EconPapers)
JEL-codes: C23 F32 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ets and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:eec:wpaper:1813
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