An evidence of Feldstein-Horioka puzzle in selected Asian economies

Kaur, Harmeet; Sarin, Vishal

doi:10.1504/ijbg.2018.095761

Cited by 6 publications

(6 citation statements)

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“…Baharumshah et al. , 2005; Bangake and Eggoh, 2011; Chen and Shen, 2015; Kaur and Sarin, 2018; Yildirim and Orman, 2018; Patra and Mohanty, 2020). However, DOLS and FMOLS estimators have a severe limitation: they do not provide any information on the current account's error-correction mechanism, which shows the dynamics of the current account adjustment to its long-run equilibrium.…”

Section: Methodsmentioning

confidence: 99%

“…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%

“…In the existing literature on capital mobility and CAD sustainability, most authors that employ panel estimation techniques use dynamic ordinary least squares (DOLS) and fully modified (FMOLS) estimators (e.g. Baharumshah et al, 2005;Bangake and Eggoh, 2011;Chen and Shen, 2015;Kaur and Sarin, 2018;Yildirim and Orman, 2018;Patra and Mohanty, 2020). However, DOLS and FMOLS estimators have a severe limitation: they do not provide any information on the current account's error-correction mechanism, which shows the dynamics of the current account adjustment to its long-run equilibrium.…”

Section: Error-correction Modelmentioning

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%

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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: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Error-correction Modelmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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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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“…Even though there is a plethora of empirical studies investigating the Feldstein-Horioka puzzle in advanced economies, there are not many studies dealing with the puzzle in emerging economies, especially Latin American and Caribbean countries. 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).…”

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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Does the Feldstein–Horioka puzzle exist among South Asian countries? A regime‐switching approach

Patra

Mohanty

2020

Journal of Public Affairs

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A plethora of literature has been undertaken to study the validity of the Feldstein–Horioka (FH) puzzle. However, divergent views continue to persist in the FH puzzle literature. This study explores the empirical validity of the FH puzzle in the case of South Asian countries using annual data from 1960 to 2017. Both panel data approach and Markov‐switching regression approach are used to empirically analyze the FH puzzle. The results of the cointegration test confirm the long‐run relationships between saving and investment in the selected South Asian countries. The results of Markov‐switching regression confirm that the saving‐retention coefficient has shifted from high to low values and also from low to high values. Thus, the FH puzzle exists for a particular time period and mostly depends on the regime shifts in the South Asian countries. The results of panel fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) methods also confirm that FH puzzle holds for the South Asian countries. Therefore, the study suggests that any saving promotion policies are desirable for enhancing investment among the South Asian regions.

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An evidence of Feldstein-Horioka puzzle in selected Asian economies

Cited by 6 publications

References 0 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

International and Regional Capital Mobility in Latin American Countries

Does the Feldstein–Horioka puzzle exist among South Asian countries? A regime‐switching approach

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