Your browser does not support the PubReader view.
Go to this page to see a list of supporting browsers.
Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 17, No. 2, pp.255-272
ISSN: 1225-0279 (Print)
Print publication date 31 May 2004
Received 28 Jul 2004 Revised 18 Oct 2004

The Measurement of International Capital Mobility Using Panel Cointegration Estimators

Hongkee Kim
Professor, Department of International Economics, College of Economics and Business, Hannam University, Ojung-dong, Taeduk-ku, Taejon 306-791, South Korea, Tel: +82-42-629-7597, Fax: +82-42-636-5879 hongkee@mail.hannam.ac.kr

JEL Classification: F31, F32, F36

Abstract

This paper investigates the Feldstein-Horioka coefficients for OECD country group, Latin country group and Asian country group using the recently developed several nonstatioanry panel cointegration techniques. The savings and investment rates are nonstationary and cointegrated in panel. The estimated FH coefficients using panel FMOLS and DOLS estimators have significantly declined for the second sub-period of 1980-98, comparing with those for the first sub-period of 1960-79 for all three country groups. In addition, the FH coefficient using the panel cointegration estimator in FH original samples (16 OECD countries) decreases drastically for the sub-periods of 1975-98 (0.10-0.35), though it is a little smaller (0.59-0.83) than that of original FH (0.88) for 1960-74. These estimated FH coefficients are consistent with the recognitions that international capital flows have increased significantly after the 1980s. The FH coefficient using panel cointegration estimator is considered to have important information about international capital mobility.

Keywords:

Feldstein-Horioka puzzle, International capital mobility, Panel cointegration estimator

Acknowledgments

I am grateful to Reter Pedroni for his helpful comments and providing programs.

References

  • Bayoumi, T. “Saving-Investment Correlations: Immobile Capital, Government Policy or Endogenous Behavior?” IMF Staff Papers 37 (1990): 360-87. [https://doi.org/10.2307/3867294]
  • Coakley, J., Kulasi, F., and Smith, R. “Current Account Solvency and the Feldstein-Horioka Puzzle.” Economic Journal 106 (No. 436 1996): 620-7. [https://doi.org/10.2307/2235567]
  • Coakley, J., Kulasi, F., and Smith, R. “The Feldstein and Horioka Puzzle and Capital Mobility: A Review.” International Journal of Finance and Economics 3 (No. 2 1998): 169-88. [https://doi.org/10.1002/(SICI)1099-1158(199804)3:2<169::AID-IJFE74>3.0.CO;2-H]
  • Coakley, J., Fuertes, A. M., and Smith, Ron. “Small Sample Properties of Panel Times Series Estimators with I(1) Errors.” http://papers.ssrn.com/sol3/papers.cfm, 2001. [https://doi.org/10.2139/ssrn.273252]
  • Coakley, J., Fuertes, A. M., and Spagnolo, F. “The Feldstein- Horioka Puzzle Is not as Bad as You Think.” http://papers.ssrn.com/sol3/papers.cfm, 2001.
  • Coiteux, M., and Olivier, S. “The Saving Retention Coefficient in the Long Run and in the Short Run: Evidence from Panel Data.” Journal of International Money and Finance 19 (No. 4 2000): 535-48. [https://doi.org/10.1016/S0261-5606(00)00014-0]
  • Corbin, A. “Country Specific Effect in the Feldstein-Horioka Paradox: A Panel Data Analysis.” Economics Letters 72 (No. 3 2001): 297-302. [https://doi.org/10.1016/S0165-1765(01)00447-5]
  • Feldstein, M., and Horioka, C. “Domestic Saving and International Capital Flow.” Economic Journal 90 (No. 358 1980): 314-29. [https://doi.org/10.2307/2231790]
  • Ho, Tsung-wo. “The Feldstein-Horioka Puzzle Revisited.” Journal of International Money and Finance 21 (No. 4 2002): 555-64. [https://doi.org/10.1016/S0261-5606(02)00005-0]
  • Im, K. S., Pesaran, M. H., and Shin, Y. C. Testing for Unit Roots in Heterogeneous Panels. Discussion Paper, University of Cambridge, 1997.
  • Jansen, W. J. “International Capital Mobility: Evidence from Panel Data.” Journal of International Money and Finance 19 (No. 4 2000): 507-11. [https://doi.org/10.1016/S0261-5606(00)00015-2]
  • Kao, C. “Spurious Regression and Residual-Based Tests for Cointegration in Panel Data.” Journal of Econometrics 90 (1999): 1-44. [https://doi.org/10.1016/S0304-4076(98)00023-2]
  • Kao, C., and Chiang, M. H. “On the Estimation and Inference of a Cointegrated Regression in Panel Data.” Advances in Econometrics 15 (2000): 179-222. [https://doi.org/10.1016/S0731-9053(00)15007-8]
  • Kim, H. K., Oh, K. Y., and Jeong, C. W. “Panel Cointegration Results on International Capital Mobility in Asian Economies.” Journal of International Money and Finance. Forthcoming, 2004. [https://doi.org/10.1016/j.jimonfin.2004.10.006]
  • Krol, R. “International Capital Mobility: Evidence from Panel Data.” Journal of International Money and Finance 15 (No. 3 1996): 467-74. [https://doi.org/10.1016/0261-5606(96)00014-9]
  • Levin, A, Lin, C. F., and Chu, C. S. J. “Unit Root Tests in Panel Data: Asymptotic and Finite Sample Properties.” Journal of Econometrics 108 (No. 1 2002): 1-24. [https://doi.org/10.1016/S0304-4076(01)00098-7]
  • Maddala, G. S., and Wu, S. “A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test.” Oxford Bulletin of Economics and Statistics 61 (Special Issues 1999): 631-52. [https://doi.org/10.1111/1468-0084.0610s1631]
  • Mark, M., and Sul, Donggyu. A Computational Simple Cointegration Vector Estimation for Panel Data. The Ohio State University, Department of Economics Working Papers, 2002.
  • Moon, H. R., and Phillips, P. C. B. A Reinterpretation of the Feldstein-Horioka Regression from a Nonstationary Panel Viewpoint. Mimeograph, Yale University, 1998.
  • Obstfeld, M. International Capital Mobility in the 1990s. NBER Working Paper, No. 4534, 1993. [https://doi.org/10.3386/w4534]
  • Pedroni, P. “Fully Modified OLS for Heterogeneous Cointegrated Panels.” Advances in Econometrics 15 (2000): 93-130. [https://doi.org/10.1016/S0731-9053(00)15004-2]
  • Pedroni, P. “Purchasing Power parity Tests in Cointegrated Panels.” Review of Economics and Statistics 83 (No. 4 2001): 723-41. [https://doi.org/10.1162/003465301753237803]
  • Pedroni, P. “Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests, With an Application to the PPP Hypothesis.” Econometric Theory 20 (No. 3 2004): 597-625. [https://doi.org/10.1017/S0266466604203073]
  • Phillips, P. C. B., and Moon, H. “Linear Regression Limit Theory for Nonstationary Panel Data.” Econometrica 67 (No. 5 1999): 1057- 111. [https://doi.org/10.1111/1468-0262.00070]
  • Philips, Peter, and Ouliaris, S. “Asymtotic Properties of Residual Based Tests for Cointegration.” Econometrica 58 (No. 1 1990): 165-93. [https://doi.org/10.2307/2938339]
  • Quah, D. “Exploiting Cross Section Variation for Unit Root Inferences in Dynamic Panel Data.” Economic Letters 44 (1994): 1353-7. [https://doi.org/10.1016/0165-1765(93)00302-5]
  • Taylor, A. M. International Capital Mobility in History: The Saving and Investment Relationship. NBER Working Paper, No. 5743, 1996. [https://doi.org/10.3386/w5743]
  • Tesar, L. L. “Saving, Investment and International Capital Flows.” Journal of International Economics 31 (Nos. 1-2 1991): 55-78. [https://doi.org/10.1016/0022-1996(91)90056-C]