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Investment, Saving, and Taxation in an Open Economy

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  • Devereux, Michael P

Abstract

This paper surveys the literature on the relationship between domestic saving, domestic investment and international capital flows in an open economy. It addresses two related issues which appear to conflict with the standard open economy paradigm the high correlation of domestic saving and investment, first noted by Fildstein and Horioka (1980), and the claim, made by Feldstein (1994), that 1(British pound) of outward foreign direct investment reduces domestic investment by approximately 1 (British Pound). The interpretation of these empirical results is discussed, primarily with reference to the probable impact of alternative government policies aimed at stimulating the level of domestic investment. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Devereux, Michael P, 1996. "Investment, Saving, and Taxation in an Open Economy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(2), pages 90-108, Summer.
    • Handle: RePEc:oup:oxford:v:12:y:1996:i:2:p:90-108
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    Cited by:

    1. Lim, Jamus Jerome, 2014. "Institutional and structural determinants of investment worldwide," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 160-177.
    2. Apergis, Nicholas & Tsoumas, Chris, 2009. "A survey of the Feldstein-Horioka puzzle: What has been done and where we stand," Research in Economics, Elsevier, vol. 63(2), pages 64-76, June.
    3. Hatzius, Jan, 2000. "Foreign direct investment and factor demand elasticities," European Economic Review, Elsevier, vol. 44(1), pages 117-143, January.
    4. Onur ÖZDEMIR, 2022. "High-Income Countries and Feldstein-Horioka Puzzle: Econometric Evidence from Dynamic Common-Correlated Effects Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 45-67, April.
    5. Savaş ÇEVİK, 2015. "Domestic Saving and Tax Structure: Evidence from Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 23(23).
    6. Malgorzata Jakubiak & Pawel Kaczorowski & Joanna Siwinska-Gorzelak & Tomasz Tokarski, 1999. "Private, Public and Foreign Savings," CASE Network Studies and Analyses 0186, CASE-Center for Social and Economic Research.

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