does bank competition reduce cost of credit cross country evidence from europe abstract despite the extensive debate on the effects of bank competition on economic welfare and growth only a handful of single country studies deal with the impact of bank competition on the cost of credit we contribute to the literature by investigating the impact of bank competition on the cost of credit in a cross country setting using a panel of firms from 20 european countries covering the period 2001 2011 we consider a broad set of measures of bank competition including two structural measures herfindahl hirschman index and cr5 and two non structural indicators lerner index and h statistic we find that bank competition increases the cost of credit and observe that the positive influence of bank competition is stronger for smaller companies our findings accord with the information hypothesis whereby a lack of competition incentivizes banks to invest in soft information and conversely increased competition raises the cost of credit this positive impact of bank competition is however influenced by the institutional and economic framework as well as by the crisis

the international transmission of real business cycles the authors present a stochastic model of two barter economies with production linked by free trade in goods and securities which generates pareto efficient international transmissions of business cycle disturbances each country is inhabi ted by an infinitely lived representative firm and consumer worker and is subject to country specific production shocks the internation al capital market effects perfect pooling of country specific risk c onsumption and output volatility may be higher in trade than under au tarchy as agents can be induced to undertake additional risk in exchange for a higher expected utility copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

capital mobility and foreign debt sustainabilty some evidence from turkey this paper address the extent of capital mobility and foreign debt sustainability in turkey over the 1962 2003 period by examining the relationship between saving and investment and imports and exports respectively the empirical investment is based on cointegration error correction models and threshold and momentum threshold autoregressive models our findings are consistent with the existence of capital mobility and the strong form of foreign debt sustainability

do decoupled payments affect investment financing constraints evidence from irish agriculture abstract this paper empirically tests whether decoupled subsidies decrease investment financing constraints faced by farms using a panel dataset from ireland over the period 2005 2010 we test whether the cap decoupled subsidy payments reduce credit constraints by altering the risk profile of farm earnings we test for financing constraints in a neoclassical q model using investment cash flow sensitivities our econometric methodology controls for censoring heterogeneity and endogeneity we find that decoupled subsidies do reduce credit constraints the effect is greater for farms that face higher constraints dairy farmers and younger farms this evidence suggests that over and above the effect on production indicated in previous research decoupling affects farm investment through financial channels

on china s domestic capital mobility and the role of the government empirical evidence over 1970 2006 this article investigates capital mobility across 29 provinces in china for the period of 1970 2006 using the feldstein horioka fh approach and campbell and mankiw s consumption smoothing cs framework it also examines the role of the governments in driving provincial capital mobility if the provincial government investment is not properly separated out from the private investment the fh framework applied to the overall saving and investment private plus public is found to underestimate the private saving investment correlation and hence overstates the degree of private capital mobility compared with the cs framework that focuses on the private consumption and output both frameworks indicate strong correlation between private saving investment and private consumption output implying strong barriers in the provincial private capital flows however there is ample evidence that capital mobility has been rising over time particularly after the mid 1990s it also appears that the government facilitates capital flows through inter governmental transfers during the sample period the extent of provincial capital mobility sheds light on the ability of different provinces in diversifying idiosyncratic provincial risks the earlier findings are robust to alternative measurements of variables and model specifications

theory based measurement of the saving investment correlation with an application to norway i introduction the findings of feldstein and horioka 19c 0 have led to numerous theoretical and empirical papers on the close correlation between domestic saving and domestic investment and its supposed implications for international capital mobility feldstein and horioka 1980 317 state that with perfect world capital mobility there should be no relation between domestic saving and domestic investment saving in each country responds to the worldwide opportunities for investment while investment in that country is financed by the worldwide pool of capital however in a cross country regression using period averaged saving and investment figures for sixteen oecd countries they obtain a significant coefficient close to unity and conclude that capital is rather immobile this result constitutes the feldstein horicka puzzle as it contradicts the widely held perception that capital is highly mobile across countries subsequent empirical work confirmed the close correlation though its implication for the degree of capital mobility is a moot point see tesar 1991 this paper contributes to the understanding of the puzzle on both theoretical and empirical counts first we present a theory based econometric specification for estimating saving investment correlations second we discuss the possible usefulness of the estimates for detecting capital mobility third we provide empirical results for the interesting case of norway we argue that feldstein and horioka s basic idea that the saving investment correlation contains information about international capital mobility is correct but that the interpretation of the estimated correlation value must be altered substantially in view of the results derived from modern macroeconomic models our research is motivated by the observation that various regression equations have been used to measure the saving investment correlation but that none of them has a firm theoretical foundation this in turn raises questions about the interpretation and comparability of the existing empirical results we propose an econometric specification that is founded in intertemporal general equilibrium models in which agents optimize under intertemporal budget constraints we show that time series studies have estimated misspecified equations and that cross section studies are seriously flawed because they neglect dynamics as a result the puzzle may turn out to be an artifact caused by measurement errors however the significance of reliable measurement of saving investment correlations goes beyond solving the feldstein horioka puzzle because they represent stylized facts open economy models should explain norway serves as a suitable example to cement our methodological arguments with empirical evidence thanks to its system of capital controls which were phased out during the 1970s and 1980s the oil discoveries and its small size we demonstrate that the failure to take structural breaks into account seriously distorts the picture making a strong case for careful diagnostic testing our main empirical result is that the feldstein horioka puzzle does not exist for norway the paper proceeds as follows in section ii we briefly summarize the state of the discussion regarding feldstein and horioka s findings in section iii we derive our specification from the theory compare it to the previous specifications and discuss how to make inferences about capital mobility in section iv we sketch major developments in the post war norwegian economy notably the abolition of capital controls and the emergence of the important oil sector section v presents the empirical results section vi summarizes and concludes ii the feldstein horioka puzzle many authors have confirmed feldstein and horioka s result of a high and stable correlation of saving and investment for oecd countries both in cross country studies and in time series studies

does bank market power affect sme financing constraints this paper examines the extent to which bank market power alleviates or magnifies sme credit constraints using a large panel dataset of more than 118 000 smes across 20 european countries over the period 2005 2008 to our knowledge this is the first study to examine bank market power and sme credit constraints in an international developed economy setting moreover our study is the first to address a number of econometric considerations simultaneously in particular by controlling for the availability of profitable investment opportunities using a structural q model of investment our results strongly support the market power hypothesis namely that increased market power results in increased financing constraints for smes additionally we find that the relationship exhibits heterogeneity across firm size and opacity in a manner that suggests that the true relationship between bank market power and financing constraints might not be fully explained by the existing theory finally we find that the effect of bank market power on financing constraints increases in financial systems that are more bank dependent

on savings and investment dynamics in a small open economy abstract this paper constructs a stochastic overlapping generations two country model of savings and investment under conditions of perfect international capital mobility the focus of the analysis is on the relationship between savings and investment dynamics in a small open economy in response to stochastic variations in domestic and or foreign production technologies the model is simulated under alternative specifications of the stochastic distribution governing both technologies this provides insight into the very complicated nature and rich diversity of possible relationships between savings and investment dynamics

what do saving investment relationships tell us about capital mobility abstract this paper re examines the tests of international capital mobility based on saving investment regressions originated by feldstein while analyses of various measures of capital controls provide some support for the feldstein hypothesis it is shown that the existence of nontraded goods can independently lead to a saving investment correlation this theoretical critique is supported empirically an analysis of the stability of the coefficients resolves the oft reported puzzle in the literature that economies appear to have become increasingly closed financially over time

the mother of all puzzles would not go away abstract this paper studies the short run and long run relationships between saving and investment rates for 123 countries using an error correction framework the conventional wisdom suggests that capital should be more mobile for the countries with high per capita income our estimates suggest that capital is mobile for 16 countries most with a low per capita income

panel cointegration results on international capital mobility in asian economies abstract this paper investigates the feldstein horioka coefficients for 11 asian countries using the recently developed between group fmols and dols panel cointegration techniques savings and investment rates are found to be nonstationary and to be cointegrated in panels the estimated coefficients using fmols and dols are 0 39 and 0 42 respectively for the period 1980 1998 these values are much smaller than the estimates of 0 58 and 0 76 for 1960 1979 the small coefficients suggest that capital mobility increased in asian countries in the 1980s and 1990s

evaluating the impacts of foreign direct investment aid and saving in developing countries abstract we develop an open economy model to demonstrate how saving aid and direct investment inflows affect investment under asymmetric information the model that relates a firm s net worth to investment suggests that the relative impact of these financial sources depends on a country s income level financial structure and governance infrastructure we estimate the impact of each source using panel data for 64 developing countries the results provide support for the view that net worth matters and suggest that the influence of financial systems can explain why saving investment correlations are high for developed countries and lower for developing countries

saving investment correlations in developing countries abstract many studies report that the regression coefficient of saving on investment is small in developing countries we demonstrate that this finding and higher saving investment correlations in oecd countries can be explained by differences in financial structure across countries

international capital mobility what do national saving investment dynamics tell us abstract we interpret the relationship between national saving and investment in the long run as reflecting a solvency constraint and interpret the ease with which a country can run current account imbalances in the short run before it has to ultimately reverse the transaction at some future date to satisfy the solvency constraint as being positively related to the degree of international capital mobility we apply panel error correction techniques to data for 20 oecd countries from 1960 to 1999 we find that saving and investment display a long run cointegration relationship that is consistent with the interpretation that a long run solvency constraint is binding for each country over time however deviations from this long run equilibrium relation have become more persistent which suggests that capital mobility has increased

north south lending and endogenous domestic capital market inefficiencies abstract we develop an open economy model of intertemporal trade under asymmetric information capital market imperfections are endogenous and depend on a country s stage of economic development relative to the perfect information benchmark north south capital flows are dampened and possibly reversed and world interest rates are lower whereas riskless rates are equalized across borders the domestic loan rate is higher in poorer countries the model can be applied to a number of policy issues including the debt overhang problem the indexation of foreign public debts and the effect of income distribution on growth

capital mobility and global factor shocks this paper focuses on the effects of global factors on the saving investment relationship we prove that if investments and savings are affected by idiosyncratic and global components they must be cointegrated to obtain reliable estimates of the saving retention coefficient when global shocks are taken into account through common factors we find that the estimated saving retention coefficient is close to zero for a panel of 21 oecd countries

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

are saving and investment cointegrated the case of malaysia 1965 2003 this article examines whether domestic saving rate leads to higher domestic investment rate in the case of malaysia we argue that the results obtained from cross sectional studies are not able to address this issue satisfactorily and highlight the importance of individual country case studies using the recently developed autoregressive distributed lag bounds testing procedure the results reveal a robust cointegrated relationship between domestic saving and investment rates during the period 1965 to 2003

the feldstein horioka puzzle and spurious ratio correlation abstract this study shows that the feldstein horioka puzzle resembles a spurious ratio correlation due to a common deflator pearson 1896 7 empirically the feldstein horioka specification and its counterpart with an arbitrary deflator final domestic demand give similar results monte carlo results also indicates that the slope and r 2 of the ratio regression are upward biased theoretically assuming each of the original undeflated variables are linear homogeneous functions of the deflator and random disturbances formulas for and r 2 are derived as saving and investment rates are numerically small relative to the disturbances both and r 2 are predominantly determined by the disturbances and they tend towards unity when the disturbances are close in magnitude the feldstein horioka results are therefore noisy though not entirely spurious and do not necessarily reflect a strong correlation between investment and savings

does capital market structure affect farm investment a comparison using french and british farm level panel data this article considers whether differences in the structure of agriculture credit markets in france and the united kingdom alters the investment sensitivity to financial variables particularly cash flow using two panel datasets of french and british farms three approaches are used to test the sensitivity of investment to internal finance an inventory investment model a fundamental q model and euler equations for machinery investment the results suggest that the contrasting capital markets structures do induce differences in overall investment sensitivity to cash flow and its pattern across both farms with varying levels of collateral and between inventory and machinery investment this article explores whether differences in the structure of agricultural credit markets in france and the united kingdom affects access to credit theoretically asymmetric information in capital markets means that banks base their lending decisions on factors such as available collateral rather than projected profitability stiglitz and weiss binks and ennew hubbard if such information costs are affected by market structure the organization of the market also becomes a potentially important factor historical differences in the structure of agricultural capital markets in developed countries have long been recognized oecd in particular in many countries specific agricultural credit institutions for example farmer cooperative banks appeared in the first half of the twentieth century because of the difficulties faced by farmers in obtaining credit from commercial lenders the degree of state involvement in agricultural credit markets has also varied considerably across countries from

international capital mobility in oecd countries the feldstein horioka puzzle revisited abstract we utilise the most recent time series techniques of dynamic ols and examine international capital mobility across 23 oecd countries we adopt the saving investment approach where the endogeneity problem is confronted our findings show that capital has been remarkably mobile in most countries over the last three decades

country specific effect in the feldstein horioka paradox a panel data analysis abstract using panel data methods this study leads to a new interpretation of the feldstein horioka paradox a high estimated saving investment coefficient may be due less to low capital mobility than to the existence of specific individual country effects

the saving retention coefficient in the long run and in the short run evidence from panel data abstract the high correlation between domestic investment and saving found by feldstein and horioka in 1980 is by now considered a stylized fact pooling annual data for 21 oecd countries krol challenged this consensus in 1996 and found a much lower correlation than is usually admitted in the literature in this paper we show that krol does not overturn feldstein and horioka even if the degree of capital mobility is higher in the short run than in the long run we solve this apparent contradiction by excluding luxembourg from the panel and estimating an error correction form of krol s fixed effects model

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

the feldstein horioka puzzle revisited abstract krol 1996 argues that the feldstein horioka puzzle is the result of the estimation technique that using fixed effect panel regression low saving retention coefficients are found however krol s study has been criticized as revolving around the inclusion of luxembourg this paper reexamines the luxembourg problem by applying kao and chiang s 2001 dols and fmols estimators to non stationary panel data of 20 oecd countries our empirical evidences show that the inclusion or exclusion of luxembourg does not affect the estimation results instead the power of the estimation technique and of the hypothesis test matters this result is interpreted as the higher power of cointegration analysis in panel data

an equilibrium model of city size abstract this paper develops an equilibrium model of city size in which population distribution real prices and real wages are determined two possible modifications are considered one involving externalities the partial equilibrium changes resulting from these modifications are derived and seen to be quite different from the general equilibrium changes finally the paper suggests that site specific factors of production must be introduced into any consistent model of city size

the relationship between income inequality and city size a general equilibrium model of an open system of cities approach a conclusion which emerges from studies of the factors affecting income inequality among cities is that many are connected through a number of different mechanisms with city size the explanations are derived from partial equilibrium models of the labour market and ignore considerations associated with labour mobility among cities to remedy this deficiency our paper employs a well developed general equilibrium model of an open system of cities to characterise the relationship between city size and income inequality that emerges an outstanding conclusion derived is that unlike existing explanations which provide justifications only for a unidirectional positive or negative rotation between city size and income inequality the general equilibrium model applies no restrictions on the direction of the relation additional restrictions are therefore needed to justify a positive or negative relation for instance if households with high income have relative preferences for non traded goods whose prices are

the feldstein horioka puzzle revisited a monte carlo study abstract this study revisits the feldstein horioka fh puzzle by employing a variety of asymptotically efficient cointegration estimators and by using the critical values obtained from monte carlo simulations to test the hypothesis of a unit retention coefficient this leads to a lower rejection of the null than standard critical values would have implied despite ample evidence supporting the fh result there appears to be considerable heterogeneity in terms of the savings investment association and only 25 of the 23 oecd countries we examine can be characterised as open economies in the fh sense whether or not one subscribes to the fh interpretation the fh result does not appear to be robust

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

unit root tests of the current account balance implications for international capital mobility the extent of international capital mobility is assessed in a time series context the possibility that the current account balance of different 0ecd countries contains a unit root is explored it is shown that if the ratio of the current account balance to gdp is found to be integrated of the order of one the country is likely to be part of the world capital market the results for the whole period 1950 1988 indicate that the current account balance of at least germany japan and the united states contains a unit root considering the subperiods before and after 1972 it is shown that international capital mobility increased after the breakdown of the bretton woods system

savings investment and foreign capital flows have capital markets become more integrated how mobile is capital across countries does the expansion of world financial markets in the 1970s and 1980s reflect a tendency towards one integrated world capital market accessible for both industrialised and developing countries or alternatively are savings and investment rates for each economy closely tied because of international capital market imperfections this article critically assesses recent studies that have tested these hypotheses empirically for industrialised countries presents new evidence and expands data analysis to include the group of developing countries contrary to recent studies it is concluded that across industrialised countries domestic investment and savings are now much less closely linked than in the 1960s but the larger capital market integration does not extend to the group of developing countries despite their increased use of funds from international financial markets to finance domestic investment the exploratory nature of the data analysis only permits to draw s

the relationship between national saving and investment in latin america and the caribbean using panel cointegration techniques and a comprehensive data set covering the period 1980 2013 this paper finds a positive and significant correlation between national saving and domestic investment rates in latin america and the caribbean the estimated correlation is approximately 0 39 that is for every one percentage point of gdp increase in national saving domestic investment increases by 0 39 percentage points on average there are however three nuances to the headline result i the estimated correlation has been declining over time ii the regional average hides a large degree of intraregional heterogeneity and iii the estimated coefficient is largest among the biggest economies in the region low national saving rates remain a binding constraint for capital accumulation in latin america and the caribbean

the impact of public transport on us metropolitan wage inequality this article presents a wage inequality analysis for 158 large us metropolitan statistical areas msas the analysis is concerned with whether public transport has a detectable influence on 1990 levels of wage equality because public transport systems are generally designed to link residences with employment locations higher levels of service provision all other factors being equal should be associated with higher employment rates and more uniform distributions of earnings few analyses however have attempted to evaluate public policies that affect wage distributions the results of this research provide a macroscopic view of the effectiveness of urban transport investments with respect to urban wage inequality

de facto financial openness and capital mobility abstract this paper shows that de facto financial openness does does not increase capital mobility in developing developed countries and that capital is is not freely mobile in the most financially open developing developed countries

domestic saving and international capital movements in the long run and the short run the evidence and analysis in this paper support the earlier findings of feldstein and horioka 1980 that sustained increases in domestic savings rates induce approximately equal increases in domestic rates of investment new estimates for the post opec period 1974 79 imply that each extra dollar of domestic saving increases domestic investment by approximately 85 cents in a sample of 17 oecd countries an explicit analysis of the problems of identification and simultaneous equations bias suggests that the regression estimates are more relevant as a guide to the long run response of international capital flows than to their short run behavior coefficient estimates based on annual variations in savings and investment are subject to potentially severe simultaneous equations bias that is not present when annual observations are averaged over a decade or more and the regression is estimated with a cross country sample of these averages a portfolio model of international capital allocation that is presented in the paper indicates that the short run change in the rate of net foreign investment in response to a sustained increase in domestic saving is likely to be substantially greater than the ultimate steady state response this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

fundamental q cash flow and investment evidence from farm panel data this study used a 1976 1992 panel data set to test whether farm machinery investors face finance constraints tests were based on fundamental q investment equations in which cash flow was added as an additional explanatory variable results indicated that 1 credit constraints were generally not a problem during the 1970s boom 2 credit constraints became a problem during the 1980s and early 1990s because of tighter credit and or more conservative financial managerial styles 3 the investment cash flow relationships of low debt and older operator farms were not significantly affected by farm business cycles and 4 the investment cash flow relationships of high debt and young operator farms were affected strongly by business cycles debt level was the strongest determinant of credit constraints asset size and operator age were less important

capital mobility and the relationship between saving and investment rates in oecd countries abstract this paper considers tests that use data on saving and investment rates to determine the degree of international capital mobility two types of evidence are presented to show that a high correlation between saving and investment rates across oecd countries can be consistent with a high degree of capital mobility this evidence qualifies the conclusions of previous studies and casts doubt on the usefulness of testing hypotheses about capital mobility with data on saving and investment rates

adam smith s answer to the feldstein horioka paradox the invisible hand revisited abstract adam smith explained the feldstein horioka paradox arguing that it is the pursuit of security that leads owners of capital to invest at home and that it is the pursuit of security not profit that leads them to promote the good of society

are saving and investment cointegrated an ardl bounds testing approach using the newly developed ardl bounds testing procedure we find that as implied by the intertemporal budget constraint u s saving and investment rates cointegrate in all sample periods considered our results also show that the saving investment correlation weakens after 1971 suggesting that the feldstein horioka approach provides an at least partially informative measure of capital mobility

credit rationing and relationship lending does firm size matter abstract using survey based data we investigate factors influencing credit rationing within a bank based financial system we show that rationing depends on various dimensions of the firm bank relationships and that the effects of relationship lending on rationing are not identical for different firm size groups multiple banking increases the probability of rationing for small and large firms debt concentration with the main bank affects positively smaller firms while the opposite is true for large companies the length of the relationship with the main bank decreases the probability of rationing for both groups but more so for large firms endowed with more bargaining power finally the firm bank spatial proximity measured by the headquarters vicinity does not affect the firm s access to credit

bank concentration and financial constraints on firm level investment in europe abstract this study examines the effect of bank concentration on financing constraints of non financial firms in 14 european countries between 1992 and 2005 using firm level data we analyze financial constraints with the euler equation derived from the dynamic investment model we find that with a highly concentrated banking sector firms are less financially constrained this result is robust to consideration of firm opacity firm size and business cycle relaxation of financial constraint while greater for firms in less opaque industries also accrues for firms in more opaque industries greater bank concentration is associated with less tight financial constraint during both expansions and recessions results overall are consistent with an information based hypothesis that more market power increases banks incentives to produce information on potential borrowers findings are robust to consideration of country specific institutional factors

testing the validity of the feldstein horioka puzzle for australia this article presents the details of an investigation into the relationship between investment and savings in australia over the period 1960 to 2007 using five time series techniques our results reveal that the feldstein horioka puzzle exists in a weak form with a lower saving retention coefficient granger causality tests illustrate that savings granger causes investment both in the short and long runs our results suggest australia could effectively adopt policies that focus on increasing investment through increasing domestic savings

current account solvency and the feldstein horioka puzzle in this paper we suggest an alternative explanation of the high cross section association between shares of saving and investment in gdp which feldstein and horioka 1980 interpret as evidence of low capital mobility in oecd countries saving and investment shares appear to be i i we show that a solvency constraint implies that the current balance is stationary and thus that saving and investment cointegrate with a unit coefficient irrespective of the degree of capital mobility it is this long run relation that the fh cross section regression captures econometric results for 23 oecd countries over the 1960 92 period are consistent with this explanation

explaining armington what determines substitutability between home and foreign goods for decades trade economists have modeled imperfect substitution between home and foreign goods in consumption often called the armington assumption with little analysis of what explains the wide variation in these substitution elasticities across sectors using a varying coefficients model the authors estimate armington elasticities between u s domestic and foreign goods across over one hundred industrial sectors from 1980 to 1988 and examine the role of product industry political and home bias factors as determinants they find strong support that the presence of foreign owned affiliates affects armington elasticities in important ways and some support that entry barriers and union presence have an effect

international capital mobility evidence from panel data abstract krol krol r 1996 journal of international money and finance 15 467 474 reports estimates of the saving investment correlation based on panel regressions that are much lower than those commonly found in the literature this note argues that this low estimate is not related to the panel estimation technique as krol claims but largely to the inclusion of luxembourg in the sample panel estimation reduces the correlation s estimate only by about 0 12

international capital mobility evidence from panel cointegration tests abstract panel cointegration techniques applied to pooled data for 50 developed and developing economies for the period 1970 2000 indicate that savings and investment are non stationary and cointegrated that there are marked differences in saving retention ratios between different country groups and that retention ratios have fallen

international capital mobility evidence from panel data abstract to test whether capital is internationally mobile some researchers have examined the relationship between saving and investment using time averaged data they find saving and investment to be related and conclude that capital is relatively immobile in this paper i argue that a country s intertemporal budget constraint biases results using time averaged data against finding capital mobility using annual data pooled for 21 oecd countries over the 1962 1990 period i find the estimated impact of saving on investment to be considerably smaller than previous estimates

how do capital controls affect international trade abstract trade effects of capital controls have not been thoroughly examined empirically using a new dataset of capital controls on both inflows and outflows we study the impact of capital controls on international trade by augmenting the gravity model with capital controls the results consistently show that capital controls are correlated more with exports rather than imports inward capital controls reduce exports while outward capital controls promote exports

is financial inclusion good for bank stability international evidence abstract financial inclusion has become an important public policy priority following the recent global financial crisis yet we know very little of how it impacts soundness of the providers of financial services using an international sample of 2635 banks in 86 countries over the period 2004 12 we find that higher level of financial inclusion contributes to greater bank stability the positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services and also with those that operate in countries with stronger institutional quality the results are robust to instrumental variables analysis controlling for bank fixed effects alternative measures of financial inclusion among several other robustness tests our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks as such a policy drive is good for their stability

a functional coefficient model view of the feldstein horioka puzzle what does the saving investment si relation really measure and how should the si relation be measured these are two of the most discussed issues triggered by the so called feldstein horioka puzzle based on panel data we introduce a new variant of functional coefficient models that allows to separate long and short to medium run parameter dependence the new modeling framework is applied to uncover the determinants of the si relation macroeconomic state variables such as openness the age dependency ratio government current and consumption expenditures are found to affect the si relation significantly in the long run

the effect of city size on the urban income distribution through time 1950 70 in the literature on the urban income distribution two important questions have been ignored first is the question of the appropriateness of hypotheses testing on samples of smsas with broad ranges of populations sizes the second question is the stability of the effects of city size and other determinants on the urban income distribution through time this stability is crucial to the propriety of drawing policy implications from previous studies which have employed data from only a single point in time this study finds that hypotheses tests are sensitive to the size classes of cities being examined and hence the results of hypotheses tested for smsas with broad ranges of population may be misleading the present analysis also reveals that significant structural changes have taken place in the standard linear model over time and therefore inferences regarding the future from past studies should be viewed with caution

the current account in developing countries a perspective from the consumption smoothing approach according to the consumption smoothing view a high degree of capital mobility implies that agents are able to fully smooth their consumption in the face of shocks this article develops aframework to test whether indeed the current account in developing countries acts as a buffer to smooth consumption in the face of shocks to national cash flow which is defined as output less investment less government expenditure using vector autoregression analysis we estimate the optimal consumption smoothing current account with data from a sample of forty five developing countries we find that for a majority of the countries the hypothesis offull consumption smoothing cannot be rejected suggesting that capital mobility may after all be quite high in this group of countries

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

saving investment and capital mobility in eu member countries a panel data analysis of the feldstein horioka puzzle in this paper we reexamine the long standing and puzzling correlation between national saving and investment in 14 european union eu countries we employ a panel data set for the period 1970 201

capital mobility in developing countries some measurement issues and empirical estimates an economy s financial integration with the outside world the extent of capital mobility across its borders is a key determinant of some of its most important macroeconomic properties yet little is known about this characteristic of many developing economies an important stumbling block in the empirical assessment of financial integration openness is the many approaches to measuring it the author describes and evaluates different tests of capital mobility surveys existing evidence and applies four tests of capital mobility to assess the degree to which the many developing countries tested have achieved integration with the world financial markets the four tests are the 1 magnitude of gross capital flows 2 uncovered interest rate parity 3 strength of saving investment correlations and 4 behavior of domestic consumption over time the evidence suggests that most developing countries can be considered to be financially open in only 18 of the 57 developing countries classified did the data fail to show financial openness and that many countries may be experiencing an increased degree of integration with world financial markets

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

vignettes on the world capital market this paper is motivated by a sense that we as a profession need to understand much better than we now do how the world capital market works we seem to be genuinely schizophrenic in the ways we build models many of them are closedeconomy models in which the rest of the world does not even appear yet others of them are models of the small open economy in which hardly any degree of freedom is left for economic policy to influence events lying behind the schizophrenia is i believe a genuine ignorance on our collective part of how the world capital market

the feldstein horioka puzzle revisited abstract this paper confirms the evidence that the feldstein horioka test does not reflect capital mobility in the real side world economy but only the variability between external and domestic saving

savings and investment in australia it has become popular to advocate tax reduction on the basis of promoting savings investment and ultimately economic growth the linkage between the variables is argued by various neoclassical growth models and is further suggested by recent studies which highlight the close association between domestic saving and investment rates the close association may allow for polices which alter domestic saving levels in order to alter domestic investment levels this interpretation however presumes an endogenous investment response equally likely theoretically is that the close association is maintained by movements in national savings the present paper explicitly examines the endogeneity of the australian saving and investment rates the results highlight the exogeneity of investment the results further suggest an endogenous response on the part of australia s saving rate the results may limit the potential benefits of these tax changes

investment and saving in angola and the feldstein horioka puzzle this article analyses the relationship between investment and savings for angola using the feldstein horioka puzzle with monthly data from january 2000 to december 2013 integer and fractional integration and cointegration techniques are employed to investigate the relationship between investment and savings several regression specifications are employed concluding that the feldstein horioka puzzle is not validated for the angolan economy policy implications are derived

feldstein horioka meets a time trend abstract much of the literature relating to the feldstein horioka puzzle misses two major points it is obvious there should be a home bias and that this bias should be falling through time our empirical analysis is consistent with these points

capital flows investment and exchange rates abstract this paper incorporates international capital flows into a two country monetary general equilibrium model of asset prices with investment and production we calculate theoretical covariances between investment the current account the exchange rate and the terms of trade these covariances depend upon the coefficient of relative risk aversion the magnitude and sign of a country s net international indebtedness other properties of tastes and technologies and the stochastic processes on disturbances to productivity and monetary growth rates international capital flows arise from changes in world wealth and its relative composition in foreign and domestic assets

globalization and the feldstein horioka puzzle capital account liberalization and the integration of world financial markets should increase capital mobility across countries this article uses the feldstein horioka savings investment methodology to examine the impact of economic globalization on the degree of capital mobility in 99 countries over the period 1970 to 2005 our findings suggest that economic openness and financial market integration have led to increased capital mobility in developed as well as developing countries however their effect appears to be larger for the latter this also implies that countries with more financial openness can run higher current account deficits due to better access to external capital markets our results also support the previous findings that foreign aid supplements domestic savings for investment in developing countries