Download this Paper Open PDF in Browser

A Simple Test of the Role of Foreign Direct Investments in the Feldstein-Horioka Puzzle

9 Pages Posted: 20 Jun 2006  

Paolo Zanghieri

Generali SpA; University of Bologna - Department of Economics

Gianpaolo Rossini

University of Bologna - Department of Economics

Abstract

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.

Keywords: Feldstein-Horioka Puzzle Foreign Direct Investments

JEL Classification: F3, F4

Suggested Citation

Zanghieri, Paolo and Rossini, Gianpaolo, A Simple Test of the Role of Foreign Direct Investments in the Feldstein-Horioka Puzzle. Applied Economics Letters, Vol. 10, No. 1, pp. 39-41, 2003. Available at SSRN: https://ssrn.com/abstract=910161

Paolo Zanghieri

Generali SpA ( email )

Trieste
Italy

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Gianpaolo Rossini (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39+051+6402607 (Phone)
+39+051+6402664 (Fax)

Paper statistics

Downloads
52
Rank
327,166
Abstract Views
402