Measuring Capital Mobility in the Asia Pacific Rim

Chan, Tze-Haw and Baharumshah, Ahmad Zubaidi (2003): Measuring Capital Mobility in the Asia Pacific Rim. Published in: Open Economy Macroeconomics in East Asia-Chapter 9 (2005): pp. 169-195.

Abstract

This study revisits the Feldstein-Horioka puzzle by investigating the saving-investment nexus through the unit root test, cointegration procedure, unrestricted VAR causality, and dynamic OLS (DOLS). Ten Asia Pacific nations of different level of economic development and financial openness were being examined, using data from 1971-1999. Overall, the long run capital mobility is more apparent for four newly industrialised economies while capital flows in ASEAN countries seem to be more restricted (especially Indonesia and Thailand). As for the US and Japan, their long run saving retention coefficients are in the moderate range (0.56 and 0.45). In brief, our findings indicate that the heftiness of Feldstein-Horioka criterion in measuring capital mobility is more subjected to econometric specifications rather than country size alone.

• Item Type: MPRA Paper
• Institution: Universiti Putra Malaysia
• Language: English
• Keywords: Feldstein-Horioka puzzle; capital mobility; Asia pacific region; unrestricted VAR causality; dynamic OLS
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E20 - General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements

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