Capital mobility in developing countries: evidence from panel data
DOI:
https://doi.org/10.1590/S0101-41612007000300004Keywords:
capital mobility, panel data, heterogeneity, developing countriesAbstract
The purpose of this paper is to show that the use of panel data can shed some light on the Feldstein-Horioka puzzle. The use of panel data would bring in two advantages. First, it would avoid the bias towards low capital mobility brought by the use of time-averaged data. Second, it would make possible to take into account specific effects (heterogeneity) like a country's size. Pooling annual data for the period 1960-1996 for 29 developing countries, the estimated impact of saving on investment is considerably smaller and it is possible to conclude that there is some degree of capital mobility in developing countries. Therefore, the high estimated saving-investment correlation seems to be due more to the existence of specific individual country effects than to capital immobility. The coefficient stability through time remains a puzzle though.Downloads
References
Bagnai, A.; Manzocchi, S. Unit root tests of capital mobility in the less developed countries. Weltwirtschaftliches Archiv, v. 132, n. 3, p. 545-557, 1996.
Baxter, M.; Crucini, M. Explaining saving-investment correlations. American Economic Review, 83, p. 416-436, 1993.
Dooley, M.; Frankel, J.; Mathieson, D. International capital mobility: what do saving-
investment correlations tell us? IMF Staff Papers, v. 34, n. 3, p. 503-530, 1987.
Easterly, W. R.; Mauro, P.; Schmidt-Hebbel, K. Money demand and seigniorage
maximizing inflation. Journal of Money, Credit, and Banking, v. 27, n. 2, p. 583-603, 1995.
Feldstein, M. Domestic saving and international capital movements in the short run
and the long run. The European Economic Review 21, p. 129-151, 1983.
Feldstein, M.; Bacchetta, P. National saving and international investment. In: Bernheim,
D.; Shoven, J. (eds.), National saving and economic performance. Chicago:
University of Chicago Press, 1991, p. 201-220.
Feldstein, M.; Horioka, C. Domestic saving and international capital flows. Economic
Journal, 90, p. 314-329, June 1980.
Fleming, J. M. Domestic financial policies under fixed and under floating exchange
rates. IMF Staff Papers, v. 9, n. 3, p. 369-380, 1962.
Frankel, J. International capital mobility and crowding-out in the U.S. economy:
imperfect integration of financial markets or of goods markets? In: Hafer, R.
(ed.), How open is the U.S. economy? Lexington: Lexington Books for the Federal Reserve Bank of St. Louis, 1986, p. 33-67.
Frankel, J. Quantifying international capital mobility in the 1980s. In: Bernheim, D.;
Shoven, J. (eds.), National saving and economic performance. Chicago: Chicago University Press, 1991, p. 227-260.
Ghosh, A. R.; Ostry, J. D. The current account in developing countries: a perspective
from the consumption-smoothing approach. The World Bank Economic Review, v. 9, n. 2, p. 305-333, 1995.
Granger, C. W. J.; Newbold, P. Spurious regression in econometrics. Journal of Econometrics,
v. 2, n. 2, p. 111-120, 1974.
Harberger, A. C. Vignettes on the world capital market. American Economic Review, v. 70, Papers and Proceedings, p. 331-337, 1980.
Hausmann, J. Specification tests in econometrics. Econometrica, p. 1251-1271, November
Hussein, K. A.; Mello Jr., L. R. International capital mobility in developing countries:
theory and evidence. Journal of International Money and Finance, 18, p. 367-381, 1999.
Levich, R. M. Empirical studies of exchange rates: price behavior, rate determination
and market efficiency. In: Jones, R. W.; Kenen, P. B. (eds.), Handbook of international economics, v. II. Amsterdan: Elsevier, 1985.
Mamingi, N. Saving-investment correlations and capital mobility: the experience of
developing countries. Journal of Policy Modeling, v. 19, n. 6, p. 605-626, 1997.
Montiel, P. Capital mobility in developing countries: some measurement issues and
empirical estimates. World Bank Economic Review, v. 8, n. 3, p. 311-350, 1994.
Mundell, R. A. International economics. New York: MacMillan, 1968.
Murphy, R. G. Capital mobility and the relationship between saving and investment
in OECD countries. Journal of International Money and Finance, v. 3, p. 327-
, 1984.
Murphy, R. G. Productivity shocks, non-traded goods and optimal capital accumulation.
European Economic Review, 30, p. 1081-1095, 1986.
Obstfeld, M. Capital mobility in the world economy: theory and evidence. Carnegie-
Rochester Conference on Public Policy, 24, p. 55-104, 1986.
Obstfeld, M.; Rogoff, K. The six major puzzles in international macroeconomics: is there a common cause?. NBER Working Paper 7777, 2000.
Phillips, P. C. B.; Hansen, B. E. Statistical inference in instrumental variables regression
with I (1) processes. Review of Economic Studies, v. 57, n. 1, p. 99-125, 1990.
Sinn, S. Saving-investment correlations and capital mobility: on the evidence from
annual data. Economic Journal, 102, p. 1162-1170, September 1992.
Summers, L. H. Tax policy and international competitiveness. In: Frenkel, Jacob A.
(ed.), International aspects of fiscal policies. NBER Conference Report, Chicago: Chicago University Press, 1988, p. 340-375.
Tesar, L. Saving, investment and international capital flows. Journal of International Economics, 31, p. 55-78, 1991.
Wong, D. What do saving-investment relationships tell us about capital mobility?
Journal of International Money and Finance, v. 9, p. 60-74, 1990.
Downloads
Published
Issue
Section
License
Copyright (c) 2007 Fabiana Rocha
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
By submitting an article, the author authorizes its publication and attests that it has not been submitted to any other journal. The original article is considered final. Articles selected for publication are proofread for grammatical and orthographic errors. The journal does not pay rights for published articles. The Institute of Economic Research from the School of Economics, Business and Accounting of the University of São Paulo (Instituto de Pesquisas Econômicas da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo) owns the journal's copyright.
