Capital Mobility in Savings and Investment across China and the ASEAN-5: Evidence from Recursive Cointegration
This paper applies recursive cointegration analysis to
examine the dynamic changes in Feldstein-Horioka saving-investment
(S-I) coefficients across China and the ASEAN-5 countries over time.
To the extent that the S-I coefficients measure international capital
mobility, the main empirical results are as follows. The recursive trace
statistics show that the investment- savings nexus varies in these six
countries. There is no cointegration between investment and savings in
three countries (China, Malaysia, and Singapore), which means that
the mobility of the capital markets in the three is high and that
domestic investment in them will be financed by the global pool of
capital. As to the other three countries (Indonesia, Thailand, and
Philippines), there is cointegration between investment and savings for
part of the sample period in the three, including before 2002 for
Thailand, before 2001 for Indonesia, and before 2002 for Philippines.
This shows these three countries achieved highly mobile and open
capital markets later.
[1] M. Feldstein, and C. Horioka, Domestic saving and international capital
flows, The Economic Journal 90 (1980) 314-329.
[2] M. J. Artis and T. Bayoumi, Global capital market integration and the
current account. In M.P. Taylor (Ed.), Money and Financial Markets
(297-307). Oxford: Blackwell, 1992.
[3] M. Dooley, J. A. Frankel, and D. J. Mathieson, International capital
mobility: What do saving-investment correlations tell us?, International
Monetary Fund Staff Papers 34 (1987) 503-530.
[4] M. Feldstein, Domestic saving and international capital movements in the
long run and the short run, European Economic Review 21 (1983)
129-151.
[5] M. Feldstein, and P. Bacchetta, National saving and international
investment, NBER Working Papers 3164, 1992.
[6] R. G. Murphy, Capital mobility and the relationship between saving and
investment rates, Journal of International Money and Finance Vol. 19
(1983) 605-626.
[7] M. Obstfeld, International capital mobility in the 1990s, NBER Working
Paper 4534, 1995.
[8] A. Penati and M. Dooley, Current account imbalances and capital
formation in industrial countries 1949-1981, International Monetary
Fund Staff Papers 31 (1984) 1-14.
[9] L. Tesar, Savings, investment and international capital flows, Journal of
International Economics 31 (1991) 55-78.
[10] P. Alexakis and N. Apergis, The Feldstein-Horioka puzzle and the
exchange rate regimes: Evidence from cointegration tests, Journal of
Policy Modeling 16 (1994) 459-472.
[11] N. Apergis and L. Tsoulfidis, The relationship between saving and
finance: Theory and evidence from EU countries, Research in Economics
51 (1997) 333-358.
[12] O. Bajo-Rubio, The saving-investment correlation revisited: The case of
Spain. 1964-1994, Applied Economics Letters 5 (1998) 769-777.
[13] M. G. Caporale, E. Panopoulou, and N. Pittis, The Feldstein-Horioka
puzzle revisited: A Monte Carlo study, Journal of International Money
and Finance 24 (2005) 1143-1149.
[14] G. De Vita and A. Abbott, Are saving and investment cointegrated? An
ARDL bounds testing approach, Economics Letters 77 (2002) 293-299.
[15] M. Obstfeld, Capital mobility in the world economy: Theory and
measurement, Carnegie-Rochester Conference Series on Public Policy 24
(1986) 55-103.
[16] T. Pelagidis and T. Mastroyiannis, The saving-investment correlation in
Greece, 1960-1997: Implications for capital mobility, Journal of Policy
Modeling 25 (2003) 609-616.
[17] D. Sinha and T. Sinha, An exploration of the long-run relationship
between saving and investment in the developing economies: A tale of
Latin American countries, Journal of Post Keynesian Economics 20
(1998) 435-443.
[18] D. Sinha and T. Sinha, The mother of all puzzles would not go away,
Economics Letters 82 (2004) 259-267.
[19] J. Coakley and F. Kulasi, Cointegration of long span saving and
investment, Economics Letters 54 (1997) 1-6.
[20] J. Coakley, F. Kulasi and R. Smith, Current account solvency and the
Feldstein-Horioka puzzle, Economic Journal, 106 (1996) 620-627.
[21] A. Corbin, Country specific effect in the Feldstein-Horioka paradox: A
panel data analysis, Economics Letters 72 (2001) 297-302.
[22] T. W. Ho, The Feldstein-Horioka puzzle revisited, Journal of
International Money and Finance 21 (2002) 555-564.
[23] W. J. Jansen, International capital mobility: Evidence from panel data,
Journal of International Money and Finance 19 (2000) 507-511.
[24] S. H. Kim, The saving-investment correlation puzzle is still a puzzle,
Journal of International Money and Finance 20, (2001) 1017-1034.
[25] C. Kollias, N. Mylonidis and S. Paleologou, The Feldstein-Horioka
puzzle across EU members: Evidence from the ARDL bounds approach
and panel data, International Review of Economics and Finance 17
(2008) 380-387.
[26] S. Johansen, Statistical analysis of cointegration vectors, Journal of
Economic Dynamics and Control 12 (1988) 231-254.
[27] S. Johansen, Estimation and hypothesis testing of cointegration vectors in
Gauwwian vector autoregressive model, Econometrica 59 (1991)
1551-1580.
[28] M. Obstfeld and K. Rogoff, The six major puzzles in international
macroeconomics: Is there a common cause? NBER Working Paper, 7777,
2000.
[29] G. Elliott, T. Rothenberg, and J. Stock, Efficient tests for an
autoregression unit root, Econometric 64 (1996) 813-836.
[30] H. Hansen, and S. Johansen, Recursive estimation in cointegrated VAR
models, unpublished manuscript, University of Copenhagen, 1993.
[31] M. Osterwald-Lenum, A note with quantiles of the asymptotic
distribution of the maximum likelihood cointegration rank statistic: Four
cases, Oxford Bulletin of Economics and Statistics 54 (1992) 461-471.
[32] J. L. Huang, The trend, content, and mechanism of East Asian economic
integration and its impact on Taiwan, Council for Economic Planning and
Development, 2004.
[1] M. Feldstein, and C. Horioka, Domestic saving and international capital
flows, The Economic Journal 90 (1980) 314-329.
[2] M. J. Artis and T. Bayoumi, Global capital market integration and the
current account. In M.P. Taylor (Ed.), Money and Financial Markets
(297-307). Oxford: Blackwell, 1992.
[3] M. Dooley, J. A. Frankel, and D. J. Mathieson, International capital
mobility: What do saving-investment correlations tell us?, International
Monetary Fund Staff Papers 34 (1987) 503-530.
[4] M. Feldstein, Domestic saving and international capital movements in the
long run and the short run, European Economic Review 21 (1983)
129-151.
[5] M. Feldstein, and P. Bacchetta, National saving and international
investment, NBER Working Papers 3164, 1992.
[6] R. G. Murphy, Capital mobility and the relationship between saving and
investment rates, Journal of International Money and Finance Vol. 19
(1983) 605-626.
[7] M. Obstfeld, International capital mobility in the 1990s, NBER Working
Paper 4534, 1995.
[8] A. Penati and M. Dooley, Current account imbalances and capital
formation in industrial countries 1949-1981, International Monetary
Fund Staff Papers 31 (1984) 1-14.
[9] L. Tesar, Savings, investment and international capital flows, Journal of
International Economics 31 (1991) 55-78.
[10] P. Alexakis and N. Apergis, The Feldstein-Horioka puzzle and the
exchange rate regimes: Evidence from cointegration tests, Journal of
Policy Modeling 16 (1994) 459-472.
[11] N. Apergis and L. Tsoulfidis, The relationship between saving and
finance: Theory and evidence from EU countries, Research in Economics
51 (1997) 333-358.
[12] O. Bajo-Rubio, The saving-investment correlation revisited: The case of
Spain. 1964-1994, Applied Economics Letters 5 (1998) 769-777.
[13] M. G. Caporale, E. Panopoulou, and N. Pittis, The Feldstein-Horioka
puzzle revisited: A Monte Carlo study, Journal of International Money
and Finance 24 (2005) 1143-1149.
[14] G. De Vita and A. Abbott, Are saving and investment cointegrated? An
ARDL bounds testing approach, Economics Letters 77 (2002) 293-299.
[15] M. Obstfeld, Capital mobility in the world economy: Theory and
measurement, Carnegie-Rochester Conference Series on Public Policy 24
(1986) 55-103.
[16] T. Pelagidis and T. Mastroyiannis, The saving-investment correlation in
Greece, 1960-1997: Implications for capital mobility, Journal of Policy
Modeling 25 (2003) 609-616.
[17] D. Sinha and T. Sinha, An exploration of the long-run relationship
between saving and investment in the developing economies: A tale of
Latin American countries, Journal of Post Keynesian Economics 20
(1998) 435-443.
[18] D. Sinha and T. Sinha, The mother of all puzzles would not go away,
Economics Letters 82 (2004) 259-267.
[19] J. Coakley and F. Kulasi, Cointegration of long span saving and
investment, Economics Letters 54 (1997) 1-6.
[20] J. Coakley, F. Kulasi and R. Smith, Current account solvency and the
Feldstein-Horioka puzzle, Economic Journal, 106 (1996) 620-627.
[21] A. Corbin, Country specific effect in the Feldstein-Horioka paradox: A
panel data analysis, Economics Letters 72 (2001) 297-302.
[22] T. W. Ho, The Feldstein-Horioka puzzle revisited, Journal of
International Money and Finance 21 (2002) 555-564.
[23] W. J. Jansen, International capital mobility: Evidence from panel data,
Journal of International Money and Finance 19 (2000) 507-511.
[24] S. H. Kim, The saving-investment correlation puzzle is still a puzzle,
Journal of International Money and Finance 20, (2001) 1017-1034.
[25] C. Kollias, N. Mylonidis and S. Paleologou, The Feldstein-Horioka
puzzle across EU members: Evidence from the ARDL bounds approach
and panel data, International Review of Economics and Finance 17
(2008) 380-387.
[26] S. Johansen, Statistical analysis of cointegration vectors, Journal of
Economic Dynamics and Control 12 (1988) 231-254.
[27] S. Johansen, Estimation and hypothesis testing of cointegration vectors in
Gauwwian vector autoregressive model, Econometrica 59 (1991)
1551-1580.
[28] M. Obstfeld and K. Rogoff, The six major puzzles in international
macroeconomics: Is there a common cause? NBER Working Paper, 7777,
2000.
[29] G. Elliott, T. Rothenberg, and J. Stock, Efficient tests for an
autoregression unit root, Econometric 64 (1996) 813-836.
[30] H. Hansen, and S. Johansen, Recursive estimation in cointegrated VAR
models, unpublished manuscript, University of Copenhagen, 1993.
[31] M. Osterwald-Lenum, A note with quantiles of the asymptotic
distribution of the maximum likelihood cointegration rank statistic: Four
cases, Oxford Bulletin of Economics and Statistics 54 (1992) 461-471.
[32] J. L. Huang, The trend, content, and mechanism of East Asian economic
integration and its impact on Taiwan, Council for Economic Planning and
Development, 2004.
@article{"International Journal of Business, Human and Social Sciences:71933", author = "Chang Lee Shu-Jung and Mei-Se Chien and Chien-Chiang Lee and Hui-Ting Hu", title = "Capital Mobility in Savings and Investment across China and the ASEAN-5: Evidence from Recursive Cointegration", abstract = "This paper applies recursive cointegration analysis to
examine the dynamic changes in Feldstein-Horioka saving-investment
(S-I) coefficients across China and the ASEAN-5 countries over time.
To the extent that the S-I coefficients measure international capital
mobility, the main empirical results are as follows. The recursive trace
statistics show that the investment- savings nexus varies in these six
countries. There is no cointegration between investment and savings in
three countries (China, Malaysia, and Singapore), which means that
the mobility of the capital markets in the three is high and that
domestic investment in them will be financed by the global pool of
capital. As to the other three countries (Indonesia, Thailand, and
Philippines), there is cointegration between investment and savings for
part of the sample period in the three, including before 2002 for
Thailand, before 2001 for Indonesia, and before 2002 for Philippines.
This shows these three countries achieved highly mobile and open
capital markets later.", keywords = "Investment, savings, recursive cointegration test,
ASEAN, China.", volume = "8", number = "8", pages = "2772-10", }
