The Feldstein-Horioka fact

Abstract

This paper shows that general equilibrium effects can partly rationalize the high correlation between saving and investment rates observed in OECD countries. We find that once controlling for general equilibrium effects the saving-retention coefficient remains high in the 70’s but decreases considerably since the 80’s, consistently with the increased capital mobility in OECD countries. JEL Classification: C23, F32, F41Capital Mobility, Dynamic Factor Model, International Comovement, Saving-Investment Correlation