On the Sources of the Feldstein–Horioka Puzzle across Time and Frequencies

Ko, Jun-Hyung; Funashima, Yoshito

doi:10.1111/obes.12293

Cited by 16 publications

(5 citation statements)

References 52 publications

(101 reference statements)

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“…Ford and Horioka (2016), in explaining the Feldstein-Horioka puzzle (Feldstein and Horioka 1980;Feldstein 1983), state that net transfers of capital among countries depend not only on the integration of financial markets but also on the integration of the goods and services markets. Ko and Funashima (2019) find evidence that large markets have higher correlations between savings and investments compared with mid-and small-sized countries. Eaton et al (2016) present empirical evidence that financial friction in the goods and services markets reduces the degree of capital mobility.…”

Section: Introductionmentioning

confidence: 84%

“…Many economists, using cross-sectional, time-series, and panel data, applying various econometric techniques, have tested the celebrated Feldstein-Horioka puzzle (FH Puzzle) on the existence of varying degrees of capital mobility. Among these, notable studies dealing with the FH Puzzle using time series and cross-sectional data are Coakley and Kulasi (1997), Narayan (2005), Rocha (2006), Chen and Shen (2015), Ketenci (2012), Ma and Li (2016), Dash (2019), Ko and Funashima (2019), Zargar et al (2019), Bineau (2020), and Akkoyunlu (2020). There are more studies that employ panel data; for example, Ho (2002), Holmes (2005), Kim et al (2005), Murthy (2005Murthy ( , 2009, Payne and Kumazawa (2005), Murthy and Anoruo (2010), Narayan and Narayan (2010), Kumar and Rao (2011), Bangake and Eggoh (2012), Holmes and Otero (2014), Johnson and Lamdin (2014), Hernandez (2015), Bibi and Jalil (2016), Drakos et al (2017), Pata (2018), and Eyuboglu and Uzar (2020).…”

Section: Literature Surveymentioning

confidence: 99%

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

Murthy

Ketenci

2020

Financ Innov

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This study investigates the degree of capital mobility in a panel of 16 Latin American and 4 Caribbean countries during 1960 to 2017 against the backdrop of the Feldstein-Horioka hypothesis by applying recent panel data techniques. This is the first study on capital mobility in Latin American and Caribbean countries to employ the recently developed panel data procedure of the dynamic common correlated effects modeling technique of Chudik and Pesaran (J Econ 188:393–420, 2015) and the error-correction testing of Gengenbach, Urbain, and Westerlund (Panel error correction testing with global stochastic trends, 2008, J Appl Econ 31:982–1004, 2016). These approaches address the serious panel data econometric issues of cross-section dependence, slope heterogeneity, nonstationarity, and endogeneity in a multifactor error-structure framework. The empirical findings of this study reveal a low average (mean) savings–retention coefficient for the panel as a whole and for most individual countries, as well as indicating a cointegration relationship between saving and investment ratios. The results indicate that there is a relatively high degree of capital mobility in the Latin American and Caribbean countries in the short run, while the long-run solvency condition is maintained, which is due to reduced frictions in goods and services markets causing increase competition. Increased capital mobility in these countries can promote economic growth and hasten the process of globalization by creating a conducive economic environment for FDI in these countries.

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Section: Introductionmentioning

confidence: 84%

Section: Literature Surveymentioning

confidence: 99%

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

Murthy

Ketenci

2020

Financ Innov

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“…While the first set of studies used the discrete version of the wavelet transform 1 , the last 10 years have seen many studies adopting the Continuous Wavelet Transform (CWT). While it is increasingly becoming interminable to track empirical studies using CWT to analyze economic data, Bekiros et al (2017), Flor and Klarl (2017), Ko and Funashima (2019), and Verona (2020) are a few examples of such studies.…”

Section: Methodsmentioning

confidence: 99%

The performance of OECD's composite leading indicator

2023

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This paper evaluated the performance of OECD's Composite Leading Indicator using the Continuous Wavelet Transform. We used various wavelet tools ‐ wavelet coherency, wavelet phase and wavelet phase difference ‐ to assess the co‐movement between the Composite Leading Indicator and three macroeconomic variables ‐ Industrial Production Index, unemployment rate, and real GDP Growth ‐ at each frequency and moment. We also explored the lead–lag relationship between each pair of variables across time and frequency. We concluded that OECD's Composite Leading Indicator is a useful leading indicator of the Industrial Production Index and can be suited for forecasting the unemployment rate. However, it exhibited poor performance regarding GDP growth.

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“…Due to the authors, there was so-called a U-shaped pattern of the time path of capital mobility in Italy, Spain, the United Kingdom, and the United States. It means that capital was more mobile prior to World War I and in recent decades (Ko and Funashima, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

The verification of regional capital mobility in the Russian Federation: A spatial econometric approach

Shcherbakov

Терещенко²

2023

SUJES

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In many cases the perfect capital mobility hypothesis is used by default. Therefore, if we follow this idea there should not be any connection between internal savings and investments in a country or at least this connection must be not significant. But some of empirical research demonstrate opposite results. In economic literature this concept is well-known as the “Feldstein — Horioka Puzzle”. Considering the relative lack of studies concerning this theme on the regional level, it seems quite perspective to research the hypothesis from the mesoeconomical point of view. So, the central aim of this article is the verification of regional capital mobility in the Russian Federation, following the logics of the Feldstein — Horioka Puzzle. The main peculiarity of the paper is based on the application a spatial econometric approach. The authors use SLX (spatial lag of X model) and SDM (spatial Durbin model) models to achieve the aim. As the result it was found out that there is almost perfect capital mobility situation on the regional level in the Russian Federation. Hereby the Feldstein — Horioka Puzzle was rejected. Along with it several significant direct and indirect effects were established (for instance, reinforced interaction between geographical neighbors-region, absent of capital flow from some regions and other). The results can be used for the consideration of relatively more efficient regional government policy.

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On the Sources of the Feldstein–Horioka Puzzle across Time and Frequencies

Cited by 16 publications

References 52 publications

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

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

The performance of OECD's composite leading indicator

The verification of regional capital mobility in the Russian Federation: A spatial econometric approach

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