The Feldstein-Horioka puzzle in Latin American and Caribbean countries: A panel cointegration analysis

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Abstract

In this paper, the recently developed panel unit root and the Pedroni cointegration tests are applied to empirically examine the validity of the Feldstein-Horioka puzzle (F-H puzzle) for a heterogeneous panel of 14 Latin American and five Caribbean countries over the period, 1960-2002. The findings indicate that in these countries, the long-run solvency condition is maintained. Finally, employing the Pedroni panel group FM-OLS estimator (2000, 2001), it is found that the statistically significant estimated savings-retention coefficient for the panel is relatively small indicating that the F-H Puzzle is not valid and thus implying the prevalence of a moderate degree of capital mobility.

Original languageEnglish (US)
Pages (from-to)176-188
Number of pages13
JournalJournal of Economics and Finance
Volume33
Issue number2
DOIs
StatePublished - Apr 27 2009

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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