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Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks

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  • Rao, B. Bhaskara
  • Tamazian, Artur
  • Kumar, Saten

Abstract

A systems GMM estimation method is used to estimate the Feldstein-Horioka equation from 1960-2007 with a panel of 12 OECD countries. It is found that the Feldstein-Horioka puzzle exists in a weaker form with a much reduced saving retention coefficient. The Bretton Woods agreement in particular has weakened the Feldstein-Horioka puzzle by significantly improving international capital mobility. In comparison the Maastricht agreement seems to have improved capital mobility only by a small magnitude. The Blundell and Bond approach systems GMM method and the structural break tests of Mancini-Griffoli and Pauwels are used in this paper.

Suggested Citation

  • Rao, B. Bhaskara & Tamazian, Artur & Kumar, Saten, 2009. "Systems GMM estimates of the Feldstein-Horioka puzzle for the OECD countries and tests for structural breaks," MPRA Paper 15312, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:15312
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    More about this item

    Keywords

    Feldstein-Horioka puzzle; Structural breaks; Effects of Bretton Woods and Maastricht agreements on international capital mobility.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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