International Conference on Eurasian Economies
1-3 July 2014 – Skopje, MACEDONIA
Paper detail
Paper ID : 916
Status : Paper published
Language : Turkish
Topic : Regional Economics
Presenter: Prof. Dr. Kerem Karabulut
Session : 2D Finans
The Feldstein-Horioka Puzzle for Eurasian Economies
Avrasya Ekonomileri için Feldstein-Horioka Bilmecesi
- Asst. Prof. Dr. Serap Bedir (Erzurum Technical University, Türkiye)
- Asst. Prof. Dr. Dilek Özdemir (Atatürk University, Türkiye)
- Prof. Dr. Kerem Karabulut (Atatürk University, Türkiye)
Abstract
The presence of a relation between saving and investment which has been debated in the empirical literature following the pioneering of Feldstein-Horioka (1980) is paramount to the determination of economic policies. Feldstein-Horioka (1980) stated that the relationship between saving and investment depends on the degree of international capital mobility. A high correlation between saving and investment is often taken as evidence of capital immobility. The purpose of this study is to empirically test the validity of the Feldstein-Horioka puzzle. The model developed within the context of the theoretical framework was estimated by means of panel ARDL (auto-regressive distributed lag bound test) approach which is a panel vector error correction method using the data for Eurasian economics for the period 1992-2011. The data is taken from World Development Indicators. The short-run analysis supports the Feldstein-Horioko hypothesis and captured from error correction model (ECM). The results of the bounds test suggest that there is a long run relationship between savings and investment. Therefore, the Feldstein–Horioko correlations are not a puzzle for our sample because of the low correlation and high capital mobility.
JEL codes: C23, F21, F41
Bedir, Serap, Özdemir, Dilek, Karabulut, Kerem (2014). "The Feldstein-Horioka Puzzle for Eurasian Economies" in Proceedings of International Conference of Eurasian Economies 2014, pp.699-707, Skopje, MACEDONIA.
DOI: https://doi.org/10.36880/C05.00916
