Capital mobility in Latin American and Caribbean countries: new evidence from dynamic common correlated effects panel data modeling

Murthy, Vasudeva N. R.; Ketenci, Natalya

doi:10.1186/s40854-020-00204-2

Cited by 3 publications

(6 citation statements)

References 80 publications

(103 reference statements)

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“…However, the main shortcoming of the aforementioned studies is the FMOLS estimator's inability to produce consistent estimation results in the presence of cross-sectional dependence. Nevertheless, the short-run estimate of 0.25 is in line with more recent findings of Murthy and Ketenci (2020b) who obtain the coefficient around 0.2 using the DCCEMG estimator. This further proves the importance of accounting for cross-sectional dependence in a panel of diverse countries.…”

Section: Panel Ecm Resultssupporting

confidence: 90%

“…Based on the previous discussion, one would expect such results to be interpreted as a lack of a binding condition for the current account. Instead, these studies interpret the long-run coefficient as an indicator of long-run capital mobility similar to Feldstein and Horioka (1980) (Costantini and Gutierrez, 2013;Hassan et al, 2014;Drakos et al, 2018;Kaur and Sarin, 2018;Pata, 2018;Tursoy and Faisal, 2019;Murthy and Ketenci, 2020b;Patra and Mohanty, 2020;Yilanci and Kilci, 2021;Camarero et al, 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

“…, 2014; Drakos et al. , 2018; Kaur and Sarin, 2018; Pata, 2018; Tursoy and Faisal, 2019; Murthy and Ketenci, 2020b; Patra and Mohanty, 2020; Yilanci and Kilci, 2021; Camarero et al. , 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Similar to the literature on CAD sustainability, few studies investigate capital mobility and the Feldstein –Horioka puzzle in Latin America and the Caribbean (Rocha, 2009; Murthy, 2009; Kumar, 2015; Cavallo and Pedemonte, 2016; Murthy and Ketenci, 2020b). Rocha (2009) employs an error-correction framework to assess the degree of capital mobility in 12 Latin American countries from to 1960–1996.…”

Section: Literature Reviewmentioning

confidence: 99%

“…, 2014; Drakos et al. , 2017, 2018; Pata, 2018; Beck and Stanek, 2019; Tursoy and Faisal, 2019; Murthy and Ketenci, 2020a, b; Beck, 2020 among others). One of the most widely accepted explanations of the puzzle is related to the solvency condition of the current account (CA).…”

Section: Introductionmentioning

confidence: 96%

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Capital mobility in Latin American and Caribbean countries: alternative view on the “Feldstein-Horioka” coefficient

Yersh

2022

IJOEM

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PurposeThe purpose of this study is to examine two issues, namely the degree of current account deficit (CAD) sustainability and the degree of capital mobility.Design/methodology/approachThe sample for this study comprises 24 Latin American and Caribbean countries, including three regional agreements: Andean Community, MERCOSUR (Mercado Común del Sur), and SICA (Central American Integration System). This study employs the dynamic common correlated effects mean group (DCCEMG) estimator in a panel data set to investigate the long-run relationship between savings and investment along with short-run dynamics.FindingsThe findings indicate that CAD is weakly sustainable in the Latin American and Caribbean region, MERCOSUR, and SICA, while CAD is strongly unsustainable in the Andean Community. The sub-period analysis reveals that CAD has been adversely affected by the 2008 crisis. However, in the post-crisis period, CAD has been slowly decreasing in the Latin American and Caribbean region and Andean Community, whereas CAD has continued increasing in MERCOSUR and SICA. Further, the estimates of error-correction terms and short-run coefficients indicate that the Andean Community and MERCOSUR observe a higher degree of long-run and short-run capital mobility than SICA.Practical implicationsThe results carry fundamental implications for policy-making processes aimed at maintaining sustainable CADs.Originality/valueThis study gives an alternative interpretation of the “Feldstein-Horioka” coefficient in terms of CAD sustainability and analyses the saving–investment relationship in light of Chudik and Pesaran (2015).

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Section: Panel Ecm Resultssupporting

confidence: 90%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 96%

See 3 more Smart Citations

Capital mobility in Latin American and Caribbean countries: alternative view on the “Feldstein-Horioka” coefficient

Yersh

2022

IJOEM

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The Rise and Fall of Financial Flows in EU 15: New Evidence Using Dynamic Panels with Common Correlated Effects

2023

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This paper assesses capital mobility for a panel of 15 European countries for the period 1970–2019 using dynamic common correlated effects modeling as proposed in Chudik and Pesaran (J Econ 188(2):393–420, 2015). In particular, we account for the existence of cross section dependence, slope heterogeneity, nonstationarity and endogeneity in a multifactor error correction model (ECM) that includes one homogeneous break. The analysis also identifies the heterogeneous structural breaks affecting the relationship for each of the individual countries. The ECM setting allows for a complete assessment of the domestic saving-investment relationship in the long-run as well as two other elements usually neglected: short-run capital mobility and the speed of adjustment. When we account for a single homogeneous break, this is found at the euro inception. We obtain that long-run capital mobility is high but not perfect yet. We also provide empirical evidence for the Ford and Horioka (Appl Econ Lett, 24(2), 95–97, 2017)’s hypothesis, who argue that goods market integration is a necessary condition to obtain zero correlation between domestic saving-investment. Our results stress the role played by the euro as a booster for both financial and real integration. However, a complete degree of economic integration has not been fully achieved. Short-run capital was highly mobile for the whole period, with some exceptions, coinciding with turmoil episodes. Additionally, from the application of the CS-DL threshold analysis proposed by Chudik et al. (Adv Econ, 36, 85–135, 2016), we find that economic risk and openness play a key role in capital mobility.

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Nexus Between Carbon Emissions, Energy Consumption, Urbanization and Economic Growth in Asia: Evidence From Common Correlated Effects Mean Group Estimator (CCEMG)

et al. 2021

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This study investigates the dynamic relationships between carbon emission, urbanization, energy consumption, and economic growth in a panel of 42 Asian countries for the period 2000–2014 using dynamic common correlated effects panel data modeling. This study employs second generation cross-sectional Pesaran (J. Appl. Econom., 2007, 22(2), 265-312) panel unit root, Westerlund panel cointegration tests (Econom. Stat., 2007, 69(6), 709-748), and Pesaran’s (Econometrica, 2006, 74(4), 967-1012) common correlated effects mean group estimation technique. These approaches allow for cross-sectional dependence, and are robust to the presence of common factors, serial correlation, and slope heterogeneity. The Common Correlated Effect Mean Group test reveals a high average coefficient of 0.602 between carbon emission and energy consumption while low coefficients of 0.114 and 0.184 for the pairs of carbon emission-urbanization and carbon emission-GDP, respectively for the panel as a whole, suggesting a cointegration between carbon emission, urbanization, energy consumption, and economic growth. The results indicate that there is relatively high carbon emission especially for highly populated and geopolitical risk Asian countries in the short run. Findings reveal long run relationships between the variables, which is attributed to the on-going carbon taxation and energy prices. Our results are robust to PMG-ARDL estimator. Overall, these findings cast important implications on renewable energy policy and urban planning insights for the policymakers.

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Capital mobility in Latin American and Caribbean countries: new evidence from dynamic common correlated effects panel data modeling

Cited by 3 publications

References 80 publications

Capital mobility in Latin American and Caribbean countries: alternative view on the “Feldstein-Horioka” coefficient

Capital mobility in Latin American and Caribbean countries: alternative view on the “Feldstein-Horioka” coefficient

The Rise and Fall of Financial Flows in EU 15: New Evidence Using Dynamic Panels with Common Correlated Effects

Nexus Between Carbon Emissions, Energy Consumption, Urbanization and Economic Growth in Asia: Evidence From Common Correlated Effects Mean Group Estimator (CCEMG)

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