Saving, Investment and Capital Mobility in African Countries

Posted: 25 Jun 2008

See all articles by Olumuyiwa Adedeji

Olumuyiwa Adedeji

International Monetary Fund (IMF)

John Thornton

International Monetary Fund (IMF)

Date Written: June 2007

Abstract

Recently developed panel co-integration techniques are applied to data for six African countries to test the Feldstein-Horioka approach to measuring capital mobility. The results suggest three conclusions: savings and investment in panel data are non-stationary series and they are co-integrated; capital was relatively mobile in the African countries during 1970-2000, with estimated savings-retention ratios of 0.73 (FMOLS), 0.45 (DOLS), 0.51 (DOLS with heterogeneity) and 0.39 (DOLS with cross-sectional dependence effects); and there was a marked drop in the savings-retention ratio from 1970-85 to 1986-2000. The results could be interpreted as indicating that capital mobility in African countries has increased, reflecting the implementation of market-orientated reforms, including the privatisation and rationalisation of the public sector, and the partial liberalisation of their exchange rate regimes and financial systems.

Keywords: F31, F32, F36

Suggested Citation

Adedeji, Olumuyiwa and Thornton, John, Saving, Investment and Capital Mobility in African Countries (June 2007). Journal of African Economies, Vol. 16, Issue 3, pp. 393-405, 2007. Available at SSRN: https://ssrn.com/abstract=1151068 or http://dx.doi.org/ejl039

Olumuyiwa Adedeji (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

John Thornton

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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