A reassessment of the Feldstein-Horioka hypothesis of perfect capital mobility: evidence from historical data

摘要

This short paper explores the relationship between investment and saving rates in a sample of 13 OECD countries over the period 1885–1992. To this end, I employ panel cointegration tests based on the maximum likelihood approach developed by Johansen (J Economic Dynamics Control 12:231–254, 1988) instead of conventional panel cointegration residual based tests, in order to draw sharper conclusions. Using estimation techniques appropriate for heterogeneous panels I find a low degree of capital mobility for the sub-periods 1921–1992 and 1950–1992. The findings overwhelmingly support the hypothesis of perfect capital mobility in the short run.