Feldstein-Horioka Puzzle for a Panel of 14 CEE Countries: Empirical Evidence

Abstract:     
In this paper we investigate Feldstein Horioka puzzle for 14 CEE countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Hungary, Kosovo, Latvia, Lithuania, Macedonia, Estonia, Poland, Romania, Serbia). In our paper when we investigate the whole sample of 14 CEE countries we find less positive association between investment and savings meaning that capital is highly mobile. While when we regress the subsample of those countries from the sample which are EU members we find the lowest coeffcient of association between investment and saving therefore capital is highly mobile in those countries.While in the Non-EU members from this CEE countires the coeficient is highest 0.13, meaning there is lowest capital mobility. Unit root tests proved that in this sample of countries savings are I(1) or I(2) process, and investments are stationary.

Number of Pages in PDF File: 20

Keywords: Investment savings correlation, stationarity, capital mobility, macroeconomic puzzles

JEL Classification: F41, N1

working papers series