A Functional Coefficient Model View of the Feldstein-Horioka Puzzle
Journal of International Money and Finance, 2010, 29, 1, 37-54
HERWARTZ, Helmut, XU, Fang, A Functional Coefficient Model View of the Feldstein-Horioka Puzzle, Journal of International Money and Finance, 2010, 29, 1, 37-54 - http://hdl.handle.net/1814/16502
Retrieved from Cadmus, EUI Research Repository
What does the saving-investment (SI) relation really measure and how should the SI relation be measured? These are two of the most discussed issues triggered by the so-called Feldstein-Horioka puzzle. Based on panel data we introduce a new variant of functional coefficient models that allows to separate long and short to medium run parameter dependence. The new modeling framework is applied to uncover the determinants of the SI relation. Macroeconomic state variables such as openness, the age dependency ratio, government Current and consumption expenditures are found to affect the SI relation significantly in the long run.
Cadmus permanent link: http://hdl.handle.net/1814/16502
Full-text via DOI: 10.1016/j.jimonfin.2008.12.001
Publisher: Elsevier Sci Ltd
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