The Feldstein-Horioka Puzzle: a Panel Smooth
Transition Regression Approach

Julien Fouquau (1) , Christophe Hurlin (1) , Isabelle Rabaud (1)

1 LEO - Laboratoire d'économie d'Orleans [2008-2011]

This paper proposes an original framework to determine the relative influence of five
factors on the Feldstein and Horioka result of OECD countries with a strong saving-
investment association. Based on panel threshold regression models, we establish
country-specific and time-specific saving retention coefficients for 24 OECD coun-
tries over the period 1960-2000. These coefficients are assumed to change smoothly,
as a function of five threshold variables, considered as the most important in the
literature devoted to the Feldstein and Horioka puzzle. The results show that; de-
gree of openness, country size and current account to GDP ratios have the greatest
influence on the investment-saving relationship.

Mots clés: Feldstein Horioka puzzle; Panel Smooth Threshold Regression models; <br />saving-investment association; capital mobility .; capital mobility

Domaines: Economies et finances

Julien Fouquau, Christophe Hurlin, Isabelle Rabaud. The Feldstein-Horioka Puzzle: a Panel Smooth
Transition Regression Approach. 2007. ⟨halshs-00156688v2⟩