A Simple Test of the Role of Foreign Direct Investments in the Feldstein-Horioka Puzzle
Generali SpA; University of Bologna - Department of Economics
University of Bologna - Department of Economics
Applied Economics Letters, Vol. 10, No. 1, pp. 39-41, 2003
The purpose of this paper is to test the dependency of domestic investment on domestic saving in the Feldstein-Horioka spirit. Our innovation is to use a de nition of investment that does not include foreign direct investment. We do so since FDI should not be considered in the intertemporal budget constraint of a recipient country and therefore should not be related to domestic saving in a meaningful way. Once we adopt, as the dependent variable, pure domestic investment the result is a weakened relationship between internal saving and investment.
Number of Pages in PDF File: 9
Keywords: Feldstein-Horioka Puzzle Foreign Direct Investments
JEL Classification: F3, F4
Date posted: June 20, 2006
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