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Capital Mobility in Russia

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  • Ketenci, Natalya

Abstract

This paper investigates the level of capital mobility in Russia, testing the Feldstein-Horioka puzzle proposed by Feldstein and Horioka (1980). The study examines relations between saving and investment flows in Russia in the presence of structural breaks. It employs the quarterly data for the period 1995-2013, where all estimations are made for two periods, the full period 1995-2013, and 2000-2013, the post Russian crisis period. The empirical analysis includes the Kejriwal and Perron (2008, 2010) structural break test to determine the presence of structural breaks in series and to estimate the saving-retention coefficient under the consideration of structural shifts. To allow for comparison, the parameters of the model were estimated employing the OLS and FMOLS procedures. To test the cointegration relationships between investment and saving flows of Russia, three different cointegration tests were applied to the data. First applied was the Gregory and Hansen (1996) cointegration test, which allows for one structural shift; then, in a case where two breaks were detected, the Hatemi-J (2008) cointegration test was employed. Finally, for a case where more than two breaks are detected, the Maki (2012) cointegration test, which allows for an unknown number of breaks, was applied. The results of this study provide evidence of high capital mobility and reject the existence of the FHP in the post-Russian crisis period. However, failure to reject the hypothesis of no cointegration by all employed cointegration tests denies the solvency of a current account of Russia.

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  • Ketenci, Natalya, 2014. "Capital Mobility in Russia," MPRA Paper 59013, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59013
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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. 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.

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    Keywords

    Feldstein-Horioka puzzle; saving-investment association; capital mobility; cointegration; structural breaks; Russia.;
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    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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