%0 Journal Article
%T An empirical investigation on the determinants of the saving-investment interaction
%A Gur Han Timur
%A Erden Lutfi
%A Ozkan Ibrahim
%J Panoeconomicus
%D 2011
%I Economists' Association of Vojvodina
%R 10.2298/pan1103343g
%X 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.
%K Feldstein-Horioka puzzle
%K Saving-Investment relations
%K International capital mobility
%K Cointegration
%U http://www.doiserbia.nb.rs/img/doi/1452-595X/2011/1452-595X1103343G.pdf