Open AccessAn empirical investigation on the determinants of the saving-investment interaction
Author(s) -
Timur Han Gür,
Lütfi Erden,
İbrahim Özkan
Publication year - 2011
Publication title -
panoeconomicus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.289
H-Index - 14
eISSN - 2217-2386
pISSN - 1452-595X
DOI - 10.2298/pan1103343g
Subject(s) - openness to experience , economics , cointegration , explanatory power , econometrics , investment (military) , productivity , variable (mathematics) , sample (material) , interest rate , capital (architecture) , predictive power , interaction , monetary economics , macroeconomics , statistics , psychology , mathematics , social psychology , chemistry , mathematical analysis , philosophy , history , archaeology , epistemology , chromatography , politics , political science , law
This study aims to shed light on the Feldstein-Horioka (F-H) puzzle, making use of the potential explanations put forward in the related literature. To this end, the study takes a distinct empirical route, combining a cointegration technique and regression analysis. In the first step, we obtain three definitions for the dependent variable that represent the degree of the interaction between domestic saving and investment (S-I), employing a cointegration analysis for 86 countries in the sample. In the second step, each definition of the dependent variable is regressed on potential explanations for the co-movement of the S-I such as openness, country size, productivity shocks, and real interest rate differentials. After examining a number of potential variables for their explanatory power on this puzzle, however, none of the posited variables are found to be statistically significant determinants of the S-I interaction. The results indicate that the size of the economy, productivity shocks or interest rate differentials have almost no role in explaining the S-I behavior. Further, the findings show that openness has no influence on the S-I interaction, suggesting that it is not plausible to view the S-I correlation as an indicator of international capital mobility as F-H did