Feldstein-Horioka Paradox Revisited

Hiroshi Fujiki and Yukinobu Kitamura ()

Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: A central concern in the field of international finance is always capital mobility. Feldstein-Horioka(1980) propose a simple test for international capital mobility and obtain a sign of very low capital mobility. Their interesting result is often described as the Feldstein-Horioka paradox. This paper re-examines their study using panel data analysis. Following the standard model selection procedure, preferred estimators of the elasticity of domestic investment-GDP ratio on domestic saving-GDP ratio are always significantly lower than one. In the light of our results, the Feldstein-Horioka paradox turns out to be not so robust because of cross country heterogeneities.

Date: 1994-10
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Journal Article: Feldstein-Horioka Paradox Revisited (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:a298

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