The Feldstein-Horioka puzzle and a new measure of international capital mobility

Hoffmann, M. (1999) The Feldstein-Horioka puzzle and a new measure of international capital mobility. Southampton, UK, University of Southampton (Discussion Papers in Economics and Econometrics 9916).


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In intertemporal optimization models of current account dynamics, the budget constraint will induce high degrees of positive comovement in the levels of savings and investment and the two variables are likely to be cointegrated. Error correction will then also influence the correlations of the cyclical components which will therefore be uninformative about capital mobility.

As an alternative we suggest a new measure of long-run capital mobility based on Johansen's (1988) procedure. We apply our method to historical British and US data and find surprisingly high levels of long-run capital mobility throughout the century.

Item Type: Monograph (Discussion Paper)
Related URLs:
Subjects: H Social Sciences > HB Economic Theory
Divisions : University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33151
Accepted Date and Publication Date:
Date Deposited: 05 Jul 2007
Last Modified: 31 Mar 2016 11:59

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