A Time‐series Approach to the Feldstein–Horioka Puzzle with Panel Data from the OECD Countries

Abstract

The Pedroni method is used to estimate the

European Integration and the Feldstein–Horioka Puzzle

“…Telatar et al (2007) looked at nine EU countries for the 1970-2002 period and found that six of these countries moved from a low to a high capital mobility regime with EMU. Supportive evidence for a negative EMU effect on the saving retention coefficient has also been found by Kumar and Bhaskara Rao (2011) in a sample of 13 OECD countries and Choudhry, Jayasekera and Kling (2014) in a sample of 252 countries. Schmitz and von Hagen (2011) find that current account imbalances widened significantly in the euro area since the beginning of EMU while the current account balance of the euro zone as a whole remained almost balanced.…”

“…We explore whether the FH coefficient is sensitive to institutional changes, in particular the removal of capital controls in Europe in the 1990s and EMU in 1999, and the financial crisis 3 Miller (1988) is the first study using standard cointegration techniques while later studies such as Caporale, Panopoulou and Pittis (2005) employ various asymptotically efficient cointegration estimators. For a survey see Apergis and Tsoumas (2009) and Kumar and Bhaskara Rao (2011). 4 De Vita and Abbot (2002), Kollias, Mylonidis and Paleologou (2008) and Coakley, Fuertes and Spagnolo (2004).…”

“… Miller () is the first study using standard cointegration techniques while later studies such as Caporale, Panopoulou and Pittis () employ various asymptotically efficient cointegration estimators. For a survey see Apergis and Tsoumas () and Kumar and Bhaskara Rao (). …”

A Re-Evaluation of the Feldstein-Horioka Puzzle in the Eurozone

“…Using annual time series spanning the period 1960-2002 for 15 EU countries and the U.S. and Japan, the authors find empirical evidence against the existence of low capital mobility in the long-run. Supportive evidence for a negative EMU effect on the saving retention coefficient has also been found by Kumar and Rao (2011) in a sample of 13 OECD countries. Using the Pedroni panel cointegration technique for investment and saving, they find that capital mobility has increased in the post Bretton Woods and Maastricht period.…”

Regional integration, capital mobility and financial intermediation revisited: Application of general to specific method in panel data

“…Westerlund (2006) considers the presence of multiple breaks in a sample of 15 OECD countries and found that saving and investment are cointegrated under the presence of level and trend shifts. Using the structural break test in Westerlund (2006), Kumar and Rao (2011) found that structural changes did reduce the savings retention estimates in OECD countries, especially in the post Bretton Woods and Maastricht periods. Analogous inferences were made by Rao et al (2010) using the exogenous structural break tests in Mancini-Griffoli andPauwels, 2006.…”