Capital mobility and adjustment of the current account imbalances: a bounds testing approach to cointegration in 12 countries (1880‐2001)

Abstract

The saving-investment correlation in the long run may be interpreted as an indicator of the respect of the nation's intertemporal budget constraint. In the context of the single equation method, the existence of such a long-run relationship implies that the levels of the variables as regressors must be cointegrated. Using the new approach to cointegration developed by Pesaran et al. (2001), the paper attempts to ascertain the existence of a long-run relationship between the domestic saving and investment rates in industrialized countries over the period 1880-2001 when it is not known if the variables under consideration are stationary in levels or in differences. Inferences are drawn concerning international capital mobility.

Une méta-analyse des études sur la mesure de la mobilité internationale du capital selon la méthode de Feldstein et Horioka

“…R 2 = 0,005, F = 7,613*** 14. Certains des travaux recensés portent sur des périodes débutant en 1850 (Bayoumi, 1990;Corbin, 2004;Hoffman, 2004et Obsfeld et Taylor, 2004) pour s'achever en 2003 (Nell et Santos, 2007). Afin de situer précisément chaque étude dans l'une des périodes, puisque certaines sont susceptibles d'en couvrir plusieurs simultanément, le choix d'affectation s'effectue en fonction de la valeur prise par l'année qui se trouve au centre de la période totale d'estimation.…”

“…Frankel (1989), Bayoumi (1990), De Haan et Siermann (1994), Taylor (1996), Pomfret (1997, Hogendorn (1998), Flandreau et Rivière (1999), Levy (2000), Corbin (2001Corbin ( , 2004, Hoffman (2004) ainsi que Obsfeld et Taylor (2004). L'utilisation de ces nombreuses variables dichotomiques lors de cette métaré-gression permet de considérer l'hétérogénéité des données et d'expliquer l'évolu-tion différenciée de la corrélation entre l'épargne et l'investissement.…”

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

“…While some of these studies support the FH-puzzle (see, Baxter and Crucini 1993;Caprio and Howard 1984;Dooley et al 1987), other studies demonstrate that saving-investment correlation may not be informative about the prevalence of the degree of capital mobility. Some of these studies have shown that even if capital were mobile, saving and investment may be correlated and cointegrated because of the presence and impact of other macroeconomic factors, such as the big country effect, common causes and endogenous shocks (see, Herwartz and Xu 2006;Corbin 2004;Coakley et al 2003;Coakley and Kulasi 1997;Coakley et al 1998;Obstfeld and Rogoff 2000;Bayoumi 1990;Murphy 1984). Also, it has been articulated in the literature that a country in the long-run cannot be a debtor permanently, because it has to maintain solvency by maintaining its inter-temporal budget balance.…”

European integration and external sustainability of the European Union: an application of the thesis of Feldstein and Horioka

“…A coefficient close to the unit is nothing more than the result of the intertemporal budgetary constraint (Tesar 1991, Husted 1992, Jansen 1996, Jansen and Schulze 1996, Moreno 1997, Corbin 2004.…”

“…How ''to deduce'' the thesis from the coefficients obtained? Corbin (2004) proposes that if cointegration is not rejected, the adjustment coefficients in the ECM model represent the intensity of the capital mobility. But in this case we can also put the question of the policy interventions, in the short period, to push the economy towards its balance of long period.…”