The views represented in this paper are those of the authors and do not necessarily reflect the positions or policies of the Undersecretariat of Treasury. We thank the editor and two anonymous referees for valuable comments and suggestions.

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The present paper devises an account of the possibilities that the recent crisis opens up for capitalism, which dwells upon its history. The paper takes three propositions as its starting point: First, capitalism, which must solve the problem of coordination of the decisions of different agents in changing environment, is prone to periodic and structural crises because of its very institutional structure. Second, thus, crises should be seen as signs that indicate that economic and social institutional matrix is at fault, which requires new “solutions”. Third, an appropriate account of capitalism must also take into account that crises usually require transformation almost the entire economic and socio-political institutional structure of the system. Having said this, we try to address briefly to possible and likely transformation

This study aims to shed light on the Feldstein-Horioka (F-H) puzzle, making use of the potential explanations put forward in the related literature. To this end, the study takes a distinct empirical route, combining a cointegration technique and regression analysis. In the first step, we obtain three definitions for the dependent variable that represent the degree of the interaction between domestic saving and investment (S-I), employing a cointegration analysis for 86 countries in the sample. In the second step, each definition of the dependent variable is regressed on potential explanations for the co-movement of the S-I such as openness, country size, productivity shocks, and real interest rate differentials. After examining a number of potential variables for their explanatory power on this puzzle, however, none of the posited variables are found to be statistically significant determinants of the S-I interaction. The results indicate that the size of the economy, productivity shocks or interest rate differentials have almost no role in explaining the S-I behavior. Further, the findings show that openness has no influence on the S-I interaction, suggesting that it is not plausible to view the S-I correlation as an indicator of international capital mobility as F-H did

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