THE FELDSTEIN – HORIOKA PARADOX, A CASE STUDY OF TURKEY
Journal Title: Asian Economic and Financial Review - Year 2016, Vol 6, Issue 12
Abstract
The Feldstein and Horioka (1980) is one of the globally reviewed issues in international finance and macroeconomics. The theory juxtapose relationships between saving rates and investment rates in a dynamic way, that capital mobility across nations, would act to match up incremental product of capital. It was argued that, savings (especially in unregulated international markets) would flow to countries that show a tendency of high investment opportunities. Thus, indigenous saving and investment rate would be uncorrelated. The main objective of this study is to evaluate saving - investment relationships in case of Turkey, using a Time Series (co-integration and Granger causality) analysis between the periods of 1960 ? 2014. From the findings, we discovered that a short and the long ? run relationship exist between the series, with a major structural break in 1993. The co-integration regression revealed presence of high capital mobility in Turkey. Thus, the Feldstein-Horioka paradox is a puzzle in Turkey.
Authors and Affiliations
Seyi Saint Akadiri*| Eastern Mediterranean University, Itodo Idoko Ahmed| Department of Economics, Eastern Mediterranean University, Famagusta, Via Mersin 10, Turkey, Ojonugwa Usman| Department of Economics, Eastern Mediterranean University, Famagusta, Via Mersin 10, Turkey, Medhi Seraj| Department of Economics, Eastern Mediterranean University, Famagusta, Via Mersin 10, Turkey
Keywords
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