TY - JOUR
T1 - Re-examining the Feldstein-Horioka and Sachs' views of capital mobility
T2 - A heterogeneous panel setup
AU - Holmes, Mark J.
AU - Otero, Jesús
N1 - Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 2014/9
Y1 - 2014/9
N2 - 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.
AB - 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.
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U2 - 10.1016/j.iref.2014.03.002
DO - 10.1016/j.iref.2014.03.002
M3 - Article
AN - SCOPUS:84897419601
SN - 1059-0560
VL - 33
SP - 1
EP - 11
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -