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Revisiting the Feldstein-Horioka puzzle for Turkey

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  • Şule Akkoyunlu

Abstract

The domestic saving and investment correlation as posited by Feldstein and Horioka is revisited for Turkey and tested over the whole period (1950–2017) and the two subperiods (1950–1989 and 1990–2017). The time-series properties of the data and the presence of structural breaks are properly addressed by the bounds testing procedure. Although, the investment and savings are positively correlated during the period of restricted capital mobility (1950–1989) and negatively correlated during the period of perfect capital mobility (1990–2017) according to the joint F-test on the significance of the coefficients, the long-run elasticity of investment with respect to savings ratio is significant for the whole period and for the first sub-period. The results confirm the Feldstein and Horioka hypothesis in a closed economy. However, the high, negative and insignificant long-run elasticity and non-constant coefficients in the second sub-period necessitate a full-investment model.

Suggested Citation

  • Şule Akkoyunlu, 2020. "Revisiting the Feldstein-Horioka puzzle for Turkey," Journal of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 129-148, January.
    • Handle: RePEc:taf:recsxx:v:23:y:2020:i:1:p:129-148
    DOI: 10.1080/15140326.2020.1711592
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    Cited by:

    1. Vasudeva N. R. Murthy & Natalya Ketenci, 2020. "Capital mobility in Latin American and Caribbean countries: new evidence from dynamic common correlated effects panel data modeling," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-17, December.
    2. Naib ALAKBAROV & Yılmaz BAYAR, 2021. "International Financial Market Integration and The Feldstein–Horioka Puzzle: Evidence from Emerging Market Economies," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 143-165, December.
    3. Makin, Anthony J. & Ratnasiri, Shyama, 2023. "New estimates of international capital mobility for select OECD economies," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 127-138.

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