Abstract

PENAGOS GOMEZ, Óscar; ROJAS SERRANO, Héctor  and  CAMPO ROBLEDO, Jacobo. The Feldstein-Horioka Paradox - Evidence for Colombia during 1925-2011. ecos.econ. [online]. 2015, vol.19, n.40, pp.4-24. ISSN 1657-4206.  https://doi.org/10.17230/ecos.2015.40.1.

This paper examines the relationship between national investment and saving in Colombia during the period 1925-2011. Consistent with Cardenas and Escobar (1998), an Error Correction Model is used to examine short and long run effects. The results provide evidence that investment and saving are co-integrated during the study period. The results for the co-integration vector, with and without structural breaks, indicate that capital mobility was low, which is consistent with the Feldstein -Horioka [1980] paradox. The results imply that increases in domestic saving rates reduce the mobility of financial capital in Colombia.

Keywords : Feldstein-Horioka puzzle; cointegration; error correction model.

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