Abstract
We re-examine two complementary views of international capital mobility using data for 25 OECD countries over the period 1970-2011. Estimation of the original Feldstein-Horioka and Sachs' equations provides mixed evidence of capital mobility, though we do not detect a significant bias towards finding in favour of capital immobility in using time-averaged data. However, potential bias in cross-sectional estimation motivates us to examine the data as a heterogeneous panel which allows us to control for the effects of cross-sectional dependence and endogeneity. In addressing the Feldstein-Horioka puzzle, application of the CCEMG estimator of Pesaran (2006) to the Feldstein-Horioka and Sachs' equations points towards greater (though not perfect) capital mobility than hitherto found.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1-11 |
| Number of pages | 11 |
| Journal | International Review of Economics and Finance |
| Volume | 33 |
| DOIs | |
| State | Published - Sep 2014 |
All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
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