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Financial development, exchange rate regimes and the Feldstein-Horioka puzzle: evidence from the MENA region

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  • Erdal Ozmen

Abstract

This article investigates whether the Feldstein and Horioka (1980) argument on domestic saving-investment relationship is supported by the data of the countries in the Middle East and North Africa region when financial development levels and exchange rate regimes are taken into account. To this end, we employ both the Auroregressive Distributed Lag bounds cointegration test and panel mean group procedures. The results support the view that a successful international financial integration requires compatible levels of financial intermediation. The evidence also suggests that saving-investment cointegration is not invariant to exchange rate regimes.

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  • Erdal Ozmen, 2007. "Financial development, exchange rate regimes and the Feldstein-Horioka puzzle: evidence from the MENA region," Applied Economics, Taylor & Francis Journals, vol. 39(9), pages 1133-1138.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:9:p:1133-1138
    DOI: 10.1080/00036840500447674
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    Cited by:

    1. Bangake, Chrysost & Eggoh, Jude C., 2011. "The Feldstein-Horioka puzzle in African countries: A panel cointegration analysis," Economic Modelling, Elsevier, vol. 28(3), pages 939-947, May.
    2. repec:bla:ausecr:v:46:y:2013:i:4:p:424-443 is not listed on IDEAS
    3. Eleftherios Makedonas & Stavros Tsopoglou, 2013. "Does Accounting for Foreign Capital Flows help to solve the Feldstein and Horioka Puzzle? The Case of Norway," Economic Issues Journal Articles, Economic Issues, vol. 18(1), pages 39-56, March.
    4. Guzel, Adnan & Ozdemir, Zeynel Abidin, 2011. "The Feldstein-Horioka puzzle in the presence of structural shifts: The case of Japan versus the USA," Research in International Business and Finance, Elsevier, vol. 25(2), pages 195-202, June.
    5. Mu-Shun Wang, 2013. "An Investigation of the Feldstein–Horioka Puzzle for the Association of Southeast Asian Nations Economies," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 46(4), pages /, December.
    6. Vasudeva N.R. Murthy & Natalya Ketenci, 2021. "The Feldstein–Horioka hypothesis for African countries: Evidence from recent panel error‐correction modelling," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5762-5774, October.
    7. Ketenci, Natalya, 2013. "The Feldstein–Horioka puzzle in groupings of OECD members: A panel approach," Research in Economics, Elsevier, vol. 67(1), pages 76-87.
    8. Akpaeti, Aniekan Jim, 2013. "Does Financial Sector Reforms Affect Agricultural Investments In Nigeria? A Cointegration And Var Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1(2), pages 1-16, October.
    9. Chu, Kam Hon, 2012. "The Feldstein-Horioka Puzzle and Spurious Ratio Correlation," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 292-309.
    10. Natalya Ketenci, N., 2010. "The Feldstein Horioka Puzzle by groups of OECD members: the panel approach," MPRA Paper 25848, University Library of Munich, Germany.

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