Mobility of capital and external sustainability of the Portuguese economy
Main Article Content
Abstract
The Feldstein‐Horioka thesis was considered one of the greatest puzzles in economics. Proposed to be a measure of international capital mobility, has known a process of immunisation to be con‐ formed to empirical evidence and respect econometric knowledge. We apply to the Portuguese economy the proposed tests not only to know the degree of capital mobility but also to know if this economy is external sustainable. The original ideas in the paper are our interpretation of the theoretical evolution of the F‐H the‐ sis, the importance of analysing the random nature of the model of one equation and not only the retention coefficient and the macro view given by an appropriate VAR model with investment and saving. We con‐ clude by the confirmation of important capital mobility in the Portuguese economy and the external unsus‐ tainability of this economy.
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References
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42. Hogendorn, C. (1998), ʺCapital Mobility in Historical Perspectiveʺ. Journal of Policy Modeling, 20:2.
43. Husted, S. (1992), ʺThe emerging U.S. current account deficit in the 1980s : a cointegration analysisʺ. The Review of Economics and Statistics, pp. 159‐66.
44. I.N.E. (2005), Estatísticas Trimestrais, Dezembro de 2004. Lisboa: http://www.ine.pt.
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46. ‐‐‐‐‐‐‐‐ (1997), ʺCan the intertemporal budget constraint explain the Feldstein‐Horioka puzzle?ʺ Economics Letters, 56, pp. 77‐83.
47. ‐‐‐‐‐‐‐‐ (2000), ʺInternational capital mobility: Evidence from panel dataʺ. Journal of International Money and Finance, 19, pp. 507‐11.
48. Jansen, W. and G. Schulze (1996), ʺTheory‐based Measurement of the Saving‐Investment Correlation with an Application to Norwayʺ. Economic Inquiry, 34, pp. 116‐32.
49. Kim, H., K.‐Y. Oh and C.‐W. Jeong (2005), ʺPanel Cointegration Results on International Capital Mobility in Asian Economiesʺ. Journal of International Money and Finance, 24:1, pp. 71‐82.
50. Kimball, M. (1990), ʺPrecautionary Saving in the Small and in the Largeʺ. Econometrica, 58:1, pp. 53‐73.
51. Kwiatkowski, D., et al. (1992), ʺTesting the Null Hypothesis of Stationary against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?ʺ Journal of Econometrics, 54, pp. 159‐78.
52. Lemmen, J. and S. Eijffinger 1998, ʺThe Quantity Approach to Financial Integration: The Feldstein‐Horioka Criterion Revisited (extended and updated version of the paper in Open Economics Review, Vol. 6, N.2, 1995,145‐65)ʺ, in J. Lemmen ed., Integrating Financial Markets in the European Union. Cheltenham: Edward Elgar.
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55. Mamingi, N. (1997), ʺSaving‐investment Correlations and Capital Mobility: The Experience of Developing Countriesʺ. Journal of Policy Modeling, 19:6, pp. 605‐16.
56. Moreira, A. and A. Pedrosa. (2004), As Grandes Datas da História de Portugal. Lisboa: Editorial Notícias.
57. Moreno, R. (1997), ʺSaving investment dynamics and capital mobility in the U.S. and Japanʺ. Journal of International Money and Finance, 16, pp. 837‐63.
58. Murphy, R. (1986), ʺProductivity Shocks, Non‐traded Goods and Optimal Capital Accumulationʺ. European Economic Review, 30, pp. 1081‐95.
59. Obstfeld, M. (1986), ʺCapital mobility in the world economy : theory and measurementʺ. Carnegie‐Rochester Conference Series on Public Policy:Spring, pp. 1‐24.
60. ‐‐‐‐‐‐‐‐ (1991), ʺComment on ʺD. Levyʹs Investment‐saving comovement, capital mobility, and Fiscal policyʺ.ʺ NBER Conference on Macroeconomic Effects of Fiscal Policy: Cambridge, MA.
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62. Ozmen, E. and K. Parmaksiz (2003a), ʺExchange Rate Regimes and the Feldstein‐Horioka Puzzle : The French Evidenceʺ. Applied Economics, 35:2.
63. ‐‐‐‐‐‐‐‐ (2003b), ʺPolicy Regime Change and the Feldstein‐Horioka Puzzle : The Uk Evidenceʺ. Journal of Policy Modeling, 25:2.
64. Parker, J., A. Jonathan and B. Preston (2002), ʺPrecautionary Saving and Consumption Fluctuationsʺ. NBER Working Paper, 9196.
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66. Payne, J. and H. Mohammadi (2006), ʺCapital Mobility and Savings‐Investment Correlations: panel data evidence from trnasition economiesʺ. Applied Economic Letters, 13:10, pp. 611‐3.
67. Perron, P. (1997), ʺFurther Evidence on Breaking Trend Functions in Macroeconomic Variablesʺ. Journal of Econometrics, 80, pp. 355‐85.
68. Phillips, P. (1987), ʺTime Series Regression with a Unit Rootʺ. Econometrica, 55, pp. 277‐301.
69. Phillips, P. and P. Perron (1988), ʺTesting for a Unit Root in Time Series Regressionʺ. Biometrika, 75, pp. 335‐46.
70. Pomfret, R. (1998), ʺMeasuring the Degree of Capital Mobility: What does the Feldstein‐Horioka Equation test?ʺ
71. Popper, H. (1990), ʺInternational capital mobility: direct evidence from long‐term currency swapsʺ. International Finance, Board of Governors, Federal Reserve System, 386.
72. Popper, K. (2002), Conjectures and Refutations (1963). London: Routledge.
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74. Sachs, J. (1981), ʺThe current account and macroeconomic adjustmentʺ. Brookings Papers on Economic Activity, 1, pp. 201‐68.
75. Taylor, A. (1996), ʺInternational Capital Mobility in History: the Saving‐Investment Relationshipʺ. NBER Working Paper, 5743.
76. ‐‐‐‐‐‐‐‐ (2002), ʺA century of current account dynamicsʺ. Journal of International Money and Finance, 21, pp. 725‐48.
77. Tesar, L. (1991), ʺSavings, Investment, and International Capital Flowsʺ. Journal of International Economics, 31, pp. 55‐78.
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2. Alyousha, A. and C. Tsoukis 2003, ʺA Re‐Examination of Saving‐Investment Relationships: Cointegration, Causality, and International Capital Mobilityʺ, in G. Agiomirgianakis, et al. eds., Advances in International Economics and Finance. London: Kluwer Academic Publishers.
3. Andrade, J. S. (2007), ʺLa Thèse de Feldstein‐Horioka: une mesure de la mobilité internationale du capitalʺ. Panoeconomicus, LIV:1, pp. 53‐67.
4. Bação, P. (1997), ʺInovação e Aplicações Financeiras em Portugalʺ. Working Paper, GEMF, Faculdade de Economia da Universidade de Coimbra, 9.
5. Bai, J. and P. Perron (1998), ʺTesting for and Estimation of Multiple Structural Changesʺ. Econometrica, 66, pp. 47‐79.
6. ‐‐‐‐‐‐‐‐ (2003), ʺComputation and Analysis of Multiple Structural Change Modelsʺ. Journal of Applied Economet‐ rics, 18, pp. 1‐22.
7. Banco~de~Portugal. (1984), Relatório do Conselho de Administração, Gerência de 1983. Lisboa: Banco de Portugal.
8. ‐‐‐‐‐‐‐‐. (1997), Relatório do Conselho de Administração, Gerência de 1996. Lisboa: Banco de Portugal.
9. ‐‐‐‐‐‐‐‐. (1998), Historical Series For the Portuguese Economy. Lisboa: http://www.bportugal.pt/publish/serlong/serlong_e.htm.
10. ‐‐‐‐‐‐‐‐. (2004), Relatório do Conselho de Administração, Gerência de 2003. Lisboa: Banco de Portugal.
11. Banerjee, A. and P. Zanghieri (2003), ʺA New Look at the Feldstein‐Horioka Puzzle using a Integrated Panelʺ. CEPII, 22.
12. Batista, D., et al. (1997), New Estimates for Portugalʹs GDP, 1910‐1958: Banco de Portugal.
13. Baxter, M. and M. Crucini (1993), ʺExplaining saving‐investment correlationsʺ. American Economic Review, 83, pp. 416‐36.
14. Bayoumi, T. (1990), ʺSaving‐investment correlations : immobile capital, government policy, or endogenous behaviorʺ. IMF Staff Papers, , :. 37:June, pp. 360‐87.
15. Bayoumi, T. and R. MacDonald (1995), ʺConsumption, Income and International Capital Market Integrationʺ. IMF Staff Papers, , :. 42, pp. 552‐76.
16. Blanchard, O. and F. Giavazzi (2002), ʺCurrent account deficits in the Euro Area: The end of the Feldstein‐Horioka puzzle?ʺ Brookings Papers in Economic Activity, 2, pp. 147‐86.
17. Campbell, J., A. Lo and A. MacKinlay. (1997), The Econometrics of Financial Markets. New Jersey: Princeton University Press.
18. Campbell, J. and G. Mankiw (1987), ʺAre Output Fluctuations Transitory?ʺ Quarterly Journal of Economics, 102:4, pp. 857‐80.
19. Chakrabarti, A. (2006), ʺThe Saving‐Investment Relationship Revisited: new evidence from multivariate hetero‐geneous panel cointegration analysesʺ. Journal of Comparative Economics, 34:2, pp. 402‐19.
20. Coakley, J., A.‐M. Fuertes and F. Spagnolo (2004), ʺIs the Feldstein‐Horioka Puzzle History ?ʺ University of Essex.
21. Coakley, J., F. Hasan and R.Smith (1999), ʺSaving, Investment, and Capital Mobility in LDCsʺ. Review of International Economics, 7:4.
22. Coakley, J., F. Kulasi and R. Smith (1996), ʺCurrent Account Solvency and the Feldstein‐Horioka Puzzleʺ. The Economic Journal, 106:436, pp. 620‐7.
23. ‐‐‐‐‐‐‐‐ (1998), ʺThe Feldstein‐Horioka puzzle and capital mobility: A reviewʺ. International Journal of Finance and Economics, 3, pp. 169‐88.
24. Cochrane, J. (1988), ʺHow Big is the Randon Walk in GNP?ʺ Journal of Political Economy, 96:5, pp. 893‐920.
25. Commission, E. (2005), Annual Macro Economic Database: European Commission, 4th April, http://europa.eu.int/comm/economy_finance/indicators/annual_macro_economic_database/ameco_en.htm.
26. Corbin, A. (2004), ʺCapital Mobility and Adjustment of the Current Account Imbalances: a bounds testing approach to cointegration in 12 countries (1880‐2001)ʺ. International Journal of Finance and Economics, 9, pp. 257‐76.
27. Dickey, D. and W. Fuller (1979), ʺDistribution of the Estimators for Time Series Re‐gressions with a Unit Rootʺ. Journal of the American Statistical Association, 74, pp. 427‐31.
28. Edison, H., L. Ricci and T. Slok (2002), ʺInternational Financial Integration and Economic growthʺ. Journal of In‐ ternational Money and Finance, 21:6.
29. Fattouh, B. (2005), ʺCapital Mobility and Sustainability: evidence from US current account dataʺ. Empirical Economics, 30:1, pp. 245‐53.
30. Feldstein, M. (1983), ʺDomestic saving and international capital movements in the long run and the short runʺ. European Economic Review, 30, pp. 735‐52.
31. Feldstein, M. and P. Bacchetta 1991, ʺDomestic saving and international investmentʺ, in D. Bernheim and J. Shoven eds., National saving and economic performance. Chicago: Chicago University Press.
32. Feldstein, M. and C. Horioka (1980), ʺNational saving and international capital flowsʺ. Economic Journal, 90, pp. 314‐29.
33. Feyerabend, P. (1993), Against Method (1975). London: Verso.
34. Frankel, J. 1991, ʺQuantifying International Capital Mobility in the 1980sʺ, in B. Bernheim and J. Shoven eds., National Saving and Economic Performanc. Chicago: University of Chicago Press.
35. ‐‐‐‐‐‐‐‐ (1992), ʺMeasuring International Capital Mobility: A Reviewʺ. The American Economic Review, 82:2, pp. 197‐202.
36. Frankel, J. and A. MacArthur (1988), ʺPolitical vs. currency premia in international real interest rate dfferentialsʺ. European Economic Review, 32, pp. 1083‐121.
37. Goldberg, L., J. James and J. Okunev (2003), ʺHas International Financial Integration Increased?ʺ Open Economies Review, 14:3, pp. 299‐317.
38. Hendry, D. (1996), Empirical Econometric Modelling Using Pcgive, Volume 1. London: Timberlake Consultants.
39. Heston, A., R. Summers and B. Aten. (October 2002), Penn World Table Version 6.1: Center for International Comparisons at the University of Pennsylvania (CICUP).
40. Ho, T.‐w. (2002), ʺA Panel Cointegration Approach to the Investment‐saving Correlationʺ. Empirical Economics, 27:1, pp. 91‐100.
41. Ho, T.‐W. (2003), ʺThe Saving‐retention Coefficient and Country‐size: The Feldstein‐Horioka Puzzle reconsideredʺ. Journal of Macroeconomics, 25:3.
42. Hogendorn, C. (1998), ʺCapital Mobility in Historical Perspectiveʺ. Journal of Policy Modeling, 20:2.
43. Husted, S. (1992), ʺThe emerging U.S. current account deficit in the 1980s : a cointegration analysisʺ. The Review of Economics and Statistics, pp. 159‐66.
44. I.N.E. (2005), Estatísticas Trimestrais, Dezembro de 2004. Lisboa: http://www.ine.pt.
45. Jansen, W. (1996), ʺEstimating saving‐investment correlations : evidence for OECD countries based on an error correction modelʺ. Journal of International Money and Finance, 5, pp. 749‐81.
46. ‐‐‐‐‐‐‐‐ (1997), ʺCan the intertemporal budget constraint explain the Feldstein‐Horioka puzzle?ʺ Economics Letters, 56, pp. 77‐83.
47. ‐‐‐‐‐‐‐‐ (2000), ʺInternational capital mobility: Evidence from panel dataʺ. Journal of International Money and Finance, 19, pp. 507‐11.
48. Jansen, W. and G. Schulze (1996), ʺTheory‐based Measurement of the Saving‐Investment Correlation with an Application to Norwayʺ. Economic Inquiry, 34, pp. 116‐32.
49. Kim, H., K.‐Y. Oh and C.‐W. Jeong (2005), ʺPanel Cointegration Results on International Capital Mobility in Asian Economiesʺ. Journal of International Money and Finance, 24:1, pp. 71‐82.
50. Kimball, M. (1990), ʺPrecautionary Saving in the Small and in the Largeʺ. Econometrica, 58:1, pp. 53‐73.
51. Kwiatkowski, D., et al. (1992), ʺTesting the Null Hypothesis of Stationary against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?ʺ Journal of Econometrics, 54, pp. 159‐78.
52. Lemmen, J. and S. Eijffinger 1998, ʺThe Quantity Approach to Financial Integration: The Feldstein‐Horioka Criterion Revisited (extended and updated version of the paper in Open Economics Review, Vol. 6, N.2, 1995,145‐65)ʺ, in J. Lemmen ed., Integrating Financial Markets in the European Union. Cheltenham: Edward Elgar.
53. Levy, D. (1995), ʺInvestment‐saving comovement under endogenous fiscal policyʺ. Open Economies Review, 6, pp. 237‐54.
54. Lütkepohl, H. 2004, ʺVector Autoregressive and Vector Error Correction Modelsʺ, in H. Lütkepohl and M. Krätzig eds., Applied Time Series Econometrics. Cambridge: Cambridge University Press, pp. 86‐158.
55. Mamingi, N. (1997), ʺSaving‐investment Correlations and Capital Mobility: The Experience of Developing Countriesʺ. Journal of Policy Modeling, 19:6, pp. 605‐16.
56. Moreira, A. and A. Pedrosa. (2004), As Grandes Datas da História de Portugal. Lisboa: Editorial Notícias.
57. Moreno, R. (1997), ʺSaving investment dynamics and capital mobility in the U.S. and Japanʺ. Journal of International Money and Finance, 16, pp. 837‐63.
58. Murphy, R. (1986), ʺProductivity Shocks, Non‐traded Goods and Optimal Capital Accumulationʺ. European Economic Review, 30, pp. 1081‐95.
59. Obstfeld, M. (1986), ʺCapital mobility in the world economy : theory and measurementʺ. Carnegie‐Rochester Conference Series on Public Policy:Spring, pp. 1‐24.
60. ‐‐‐‐‐‐‐‐ (1991), ʺComment on ʺD. Levyʹs Investment‐saving comovement, capital mobility, and Fiscal policyʺ.ʺ NBER Conference on Macroeconomic Effects of Fiscal Policy: Cambridge, MA.
61. Obstfeld, M. and K. Rogoff (2000), ʺThe six major puzzles in international macroeconomics: is there a common cause?ʺ NBER Working Paper, 7777.
62. Ozmen, E. and K. Parmaksiz (2003a), ʺExchange Rate Regimes and the Feldstein‐Horioka Puzzle : The French Evidenceʺ. Applied Economics, 35:2.
63. ‐‐‐‐‐‐‐‐ (2003b), ʺPolicy Regime Change and the Feldstein‐Horioka Puzzle : The Uk Evidenceʺ. Journal of Policy Modeling, 25:2.
64. Parker, J., A. Jonathan and B. Preston (2002), ʺPrecautionary Saving and Consumption Fluctuationsʺ. NBER Working Paper, 9196.
65. Payne, J. and R. Kumazawa (2006), ʺCapital Mobility and the Feldstein‐Horioka Puzzle: re‐examination of less developed countriesʺ. Manchester School, 74:5, pp. 610‐6.
66. Payne, J. and H. Mohammadi (2006), ʺCapital Mobility and Savings‐Investment Correlations: panel data evidence from trnasition economiesʺ. Applied Economic Letters, 13:10, pp. 611‐3.
67. Perron, P. (1997), ʺFurther Evidence on Breaking Trend Functions in Macroeconomic Variablesʺ. Journal of Econometrics, 80, pp. 355‐85.
68. Phillips, P. (1987), ʺTime Series Regression with a Unit Rootʺ. Econometrica, 55, pp. 277‐301.
69. Phillips, P. and P. Perron (1988), ʺTesting for a Unit Root in Time Series Regressionʺ. Biometrika, 75, pp. 335‐46.
70. Pomfret, R. (1998), ʺMeasuring the Degree of Capital Mobility: What does the Feldstein‐Horioka Equation test?ʺ
71. Popper, H. (1990), ʺInternational capital mobility: direct evidence from long‐term currency swapsʺ. International Finance, Board of Governors, Federal Reserve System, 386.
72. Popper, K. (2002), Conjectures and Refutations (1963). London: Routledge.
73. Rocha, F. and B. Zerbini (2000), ʺ Using a panel structure to discuss the Feldstein‐Horioka puzzle in developing countriesʺ. Universidade de São Paulo, S. Paulo and MFS Investment Management, Boston.
74. Sachs, J. (1981), ʺThe current account and macroeconomic adjustmentʺ. Brookings Papers on Economic Activity, 1, pp. 201‐68.
75. Taylor, A. (1996), ʺInternational Capital Mobility in History: the Saving‐Investment Relationshipʺ. NBER Working Paper, 5743.
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