The Feldstein–Horioka puzzle in Latin American and Caribbean countries: a panel cointegration analysis

Murthy, Nirmala

doi:10.1007/s12197-008-9051-5

Cited by 29 publications

(11 citation statements)

References 39 publications

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“…The average investment over GDP is 18. Murthy (2008). 19. International Monetary Fund, World Economic Outlook (WEO) database, April 2015.…”

Section: Methodology and Datamentioning

confidence: 99%

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The Relationship between National Saving and Investment in Latin America and the Caribbean

Cavallo¹,

Pedemonte

2016

lse-j-elaceaj

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Using panel cointegration techniques and a comprehensive data set covering the period 1980–2013, this paper finds a positive and significant correlation between national saving and domestic investment rates in Latin America and the Caribbean. The estimated correlation is approximately 0.39; that is, for every one percentage point of GDP increase in national saving, domestic investment increases by 0.39 percentage points, on average. There are, however, three nuances to the headline result: (i) the estimated correlation has been declining over time; (ii) the regional average hides a large degree of intraregional heterogeneity; and (iii) the estimated coefficient is largest among the biggest economies in the region. Low national saving rates remain a binding constraint for capital accumulation in Latin America and the Caribbean. JEL Classification: C23, E2, F36

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“…The average investment over GDP is 18. Murthy (2008). 19. International Monetary Fund, World Economic Outlook (WEO) database, April 2015.…”

Section: Methodology and Datamentioning

confidence: 99%

“…9. See, for example, Kim, Oh, and Jeong (2005); Bahmani-Oskooee and Chakrabarti (2005); Murthy (2008); Kumar and Rao (2011).…”

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confidence: 99%

The Relationship between National Saving and Investment in Latin America and the Caribbean

Cavallo¹,

Pedemonte

2016

lse-j-elaceaj

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“…Some studies analyzing East-Asian and African countries have revealed low saving-retention coefficient, contradicting the Feldstein-Horioka puzzle (Narayan, 2005;Guillaumin, 2009;Wang, 2013;Raheem, 2017;Murthy & Ketenci, 2021), while other papers have found little evidence on increased capital flows (Kim et al, 2007;Mitra, 2017;Kaur & Sarin, 2018;Patra & Mohanty, 2020;Yilanci & Kilci, 2021). A limited number of studies focusing on the degree of international capital mobility in the region of Latin America and the Caribbean have demonstrated low saving-retention coefficient, an indicator of high capital mobility (Murthy, 2009;Rocha, 2009;Kumar, 2015;Cavallo & Pedemonte, 2016); however, the studies either analyse a limited sample of Latina American and Caribbean countries or employ outdated panel estimation techniques or as in case of Kumar (2015) focus only on one of the Latina American regional integration agreements (MERCOSUR). Thus, this paper contributes to the literature on the Feldstein-Horioka puzzle by analysing the extent of capital flows from both regional and global perspective in three Latin American and Caribbean regional trade agreements: SICA, Andean Community and MERCOSUR.…”

Section: Literature Reviewmentioning

confidence: 99%

International and Regional Capital Mobility in Latin American Countries

Yersh

2022

Technological and Economic Development of Economy

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This study examines the role of global, regional and domestic saving for domestic investment financing in the panel of Latin American and Caribbean countries along with its three regional integration blocks, namely SICA, Andean Community and MERCOSUR. Panel regression and rolling-window estimation results reveal that global saving is the main source of domestic investment financing in the region of Latin America and the Caribbean, SICA, Andean Community and MERCOSUR. The role of domestic and regional savings is rather limited, implying that there are weak regional and domestic channels that can funnel domestic and regional savings into investment in the analysed samples. The importance of regional agreement saving is insignificant and decreases over the analysed period except for the Andean Community. The results indicate low financial integration of the member-countries within the three regional trade agreements.

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“…The author finds evidence of an intermediate degree of capital mobility. Murthy (2009) assesses the degree of capital mobility in 19 Latin American and Caribbean countries over the period 1960-2002, employing the Pedroni panel Group FMOLS technique. Similar to Rocha (2009), the author confirms a moderate degree of capital IJOEM 19,4 mobility.…”

Section: Capital Mobilitymentioning

confidence: 99%

“…The authors find that saving and investment series are cointegrated; however, the results are interpreted in terms of capital mobility rather than current account sustainability, which contradict the solvency constraint theory. Furthermore, Murthy (2009) and Cavallo and Pedemonte (2016) utilize the Pedroni panel group FMOLS estimator, which has limited power in the presence of cross-sectional dependence. Moreover, none of the existing studies have analyzed the degree of capital mobility in the SICA and the Andean community.…”

Section: Capital Mobilitymentioning

confidence: 99%

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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The Feldstein–Horioka puzzle in Latin American and Caribbean countries: a panel cointegration analysis

Abstract: Panel Unit Root, Cross Section Dependence, Panel Cointegration, Capital Mobility, C23, F2, F4,

Cited by 29 publications

References 39 publications

The Relationship between National Saving and Investment in Latin America and the Caribbean

The Relationship between National Saving and Investment in Latin America and the Caribbean

International and Regional Capital Mobility in Latin American Countries

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

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