A reassessment of the Feldstein-Horioka hypothesis of perfect capital mobility: evidence from historical data |
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Authors: | Dimitris K Christopoulos |
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Institution: | (1) Department of Economic and Regional Development, Panteion University, Leof. Syngrou 136, Athens, 17671, Greece |
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Abstract: | This short paper explores the relationship between investment and saving rates in a sample of 13 OECD countries over the period
1885–1992. To this end, I employ panel cointegration tests based on the maximum likelihood approach developed by Johansen
(J Economic Dynamics Control 12:231–254, 1988) instead of conventional panel cointegration residual based tests, in order to draw sharper conclusions. Using estimation
techniques appropriate for heterogeneous panels I find a low degree of capital mobility for the sub-periods 1921–1992 and
1950–1992. The findings overwhelmingly support the hypothesis of perfect capital mobility in the short run.
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Keywords: | International capital mobility Panel cointegration Domestic savings |
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