The Feldstein-Horioka puzzle in African countries: A panel cointegration analysis

This paper investigates the Feldstein-Horioka coefficients for 37 African countries using the recently developed Pooled Mean Group (PMG), Fully Modified OLS (FMOLS), and Dynamic OLS (DOLS) panel cointegration techniques. The empirical findings reported in this paper reveal that savings and investment are non-stationary and cointegrated series. The estimated coefficients using FMOLS, DOLS, and PMG are 0.38, 0.58, and 0.36, respectively, for the sample as a whole for the period from 1970 to 2006. These results confirm previous studies' findings that capital was relatively mobile in African countries compared to OECD countries. In addition, our study shows that there are marked differences in savings retention coefficients for different country groups in Africa (CFA franc zone and non-CFA franc zone countries, oil-producing and non-oil-producing countries, civil law and common law countries). These results have some policy implications.     

Further evidence on finance-growth causality: A panel data analysis

This paper reassesses the causal relationship between financial development and economic growth. Using recently developed panel methods on a data set of 71 developed and developing countries over the period 1960-2004, our study confirms previous results of a bidirectional causality between finance and growth. In addition, we show significant differences among country groups when considering both long-run and short-run causality. While in low and middle income countries there is no supportive evidence of short-run causality between financial development and economic growth, in high income countries economic growth significantly affects financial development.     

Pooled Mean Group estimation on international capital mobility in African countries

This paper investigates the relationship between the savings and investment rates for 37 African countries over the period 1970-2006, using the recently developed Pooled Mean Group cointegration technique. Our results show that in the long-run, capital was relatively mobile in African countries, while, in the short-run, coefficients are not significant. However, there are marked differences in ratio retentions between country groups. The savings retention coefficient is higher in civil law countries than in common law countries. Furthermore, our results show that the Feldstein-Horioka coefficient is relatively lower in non-CFA than in CFA countries. These results have some policy implications.