Saving, Investment and Capital Mobility in African Countries
Posted: 25 Jun 2008
Date Written: June 2007
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
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