Feldstein and Horioka, Mother of all puzzles

The joint paper  The “Mother of all puzzles” at thirty: A Meta-Analysis is finally out.

This paper provides a meta-analysis of 1651 point estimates of Feldstein and Horioka saving retention coefficient from 49 peer-reviewed papers published over three decades. We get two main results. First, correcting for publication bias, we find a consistent underlying coefficient lying between 0.56 and 0.67 for studies using the original paper. Second, heterogeneity reported in the estimates of the Feldstein and Horioka can be explained by a few main factors. In particular, we find evidence that the saving retention coefficient is systematically underestimated with models written in first difference, models using the saving ratio or the current account ratio as the dependent variable instead of the investment ratio, and models including indicators of the public deficit or indicators of the country size as additional explanatory variables.

Cite this blog post
Arthur Charpentier (2015, February 28). Feldstein and Horioka, Mother of all puzzles. Freakonometrics. Retrieved June 14, 2024, from https://doi.org/10.58079/ouyp

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