VALIDATION OF FELDSTEIN-HORIOKA HYPHOTESIS FOR TURKISH ECONOMY

The presence of a relation between saving and investment is important for the determination of economic policies. According to Feldstein –Horioka hypothesis, presence of the relationship between savings and investments depend on the degree of the international capital mobility. In case of the high capital mobility, the relation between saving and investment is strong. However, in the form of restricted capital mobility, the relation falters occurs. In this paper, validity of Feldstein –Horioka hypothesis is examined for Turkey by using ARDL bound test covering the period between 1980 and 2013. According to empirical results, F-H Theory is supported for Turkey.

Problems and perspectives in management, 2017

The degree of integration to the international capital markets is a crucial issue for the economic policy implementations in developing countries. A major determinant of the degree of international capital mobility is the saving-investment association. The degree of capital mobility through the domestic saving-investment interaction is first analysed by Feldstein and Horioka (1980) in a sample of OECD countries and 1960-1974 period. The empirical results of the paper supporting the dependency of domestic investments on the domestic savings are not consistent with the high capital mobility in OECD countries. This conflict is defined in the related literature as “Feldstein-Horioka Puzzle”. In this study the validity of Feldstein-Horioka puzzle for Turkey is investigated by means of World Development Indicators (WDI) annual data from 1968 to 2008 and Pesaran et al. (2001) cointegration method.

2015

The main purpose of this paper is to survey the relationship between national saving and domestic investment in the Iran economy with considering Feldstein-Horioka theory by the JohansenJuselius Cointegration test using Annual data (1965-2011). It also is trying to investigate the causality relationship between national saving and domestic investment using the Toda and Yamamoto causality test. The model estimation results show that there is a positive equilibrium long-run relationship between national savings and domestic investment in the mentioned coursed. That's the reason for low mobility of capital in the Iran economy. Toda and Yamamoto causality Test results show a one-way causal relationship from national saving to domestic investment.

2019

Panoeconomicus, 2011

This study aims to shed light on the Feldstein-Horioka (F-H) puzzle, making use of the potential explanations put forward in the related literature. To this end, the study takes a distinct empirical route, combining a cointegration technique and regression analysis. In the first step, we obtain three definitions for the dependent variable that represent the degree of the interaction between domestic saving and investment (S-I), employing a cointegration analysis for 86 countries in the sample. In the second step, each definition of the dependent variable is regressed on potential explanations for the co-movement of the S-I such as openness, country size, productivity shocks, and real interest rate differentials. After examining a number of potential variables for their explanatory power on this puzzle, however, none of the posited variables are found to be statistically significant determinants of the S-I interaction. The results indicate that the size of the economy, productivity s...

Journal of economics and sustainable development, 2015

This research has been designed to figure out the significance of the long run relation between domestic savings and gross capital formation along with approximating the extent of impact of savings on investment for the five chief SAARC economies with a view to comment on the status of the savings-investment nexus, utilizing the basic version of F-H specification. It has covered thirty-eight annual observations (1976-2013) and deployed the sophisticated panel cointegration approach as well as several alternative panel long-run association estimation techniques. It is believed that this study is the first one on that specific issue for these South Asian economies deploying such a protracted data set and incorporating alternative panel estimation methods. The results derived from the battery of sophisticated panel unit root tests have portrayed that for the pool of these developing economies, both the macro variables, savings and investment rates are non-stationary series. The residu...

CBN Journal of Applied Statistics (JAS), 2013

2006

Based on the relation between investment and domestic saving proposed by Feldsteinand Horioka (1980) to verify capital mobility, this study performs some exogeneitytests in order to determine the capacity of the FH equation of supporting andimplementing economic policies in Brazil. We then use the result of weak exogeneitytest to identify a structural vector autoregressive (SVAR) involving investment andsaving in order

Integrated Journal of Business and Economics, 2024

Feldstein-Horioka hypothesis states that if there is perfect capital mobility, low correlation between domestic investment and savings should be observed. However, empirical analysis failed to confirm the hypothesis. This study attempts to shed a new light on international capital mobility by incorporating the effect of the fiscal balance and the financial balance. Specifically, for a panel of 161 countries over the 1990–2013 period, the extended model is tested in comparison with the existing models of capital mobility. At the aggregate level, strong support is found for the extended model; while, at the region disaggre-gated level, compared to the existing models the hypothesis of capital mobility holds for a larger number of regions. Our model and estimates are additionally extended to account for the fact that the above mentioned relationships, are conditional on the country's level of financial development.