The Feldstein–Horioka puzzle in South Africa : a fractional cointegration approach

Show simple item record Gil-Alana, Luis A. André, Christophe Gupta, Rangan Chang, Tsangyao Ranjbar, Omid 2016-05-06T08:17:23Z 2016-03
dc.description.abstract The Feldstein–Horioka (FH) puzzle, that is the strong correlation between saving and investment in a world where obstacles to capital mobility are limited, has been studied extensively since it was exposed in 1980. Even though the theoretical and empirical literature has examined many of its potential causes, the puzzle persists. This paper aims at shedding further light on the issue by investigating the relationship between saving and investment in South Africa since 1946 using fractional integration and cointegration techniques to account for high persistence in the series. We find evidence of fractional cointegration between saving and investment, indicating some degree of persistence in the gap between the two variables.We also find a structural break in saving and investment ratios to GDP around 1980, which roughly coincides with the start of a financial deregulation process in South Africa. While fractional cointegration holds before the break, it does not thereafter. In other words, while the FH puzzle is observed before the start of financial deregulation, it subsequently disappears. This suggests that financial deregulation may have loosened the link between saving and investment. en_ZA
dc.description.department Economics en_ZA
dc.description.embargo 2017-09-30
dc.description.librarian hb2016 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Luis A. Gil-Alana, Christophe Andr é, Rangan Gupta, Tsangyao Chang & Omid Ranjbar (2016) The Feldstein –Horioka puzzle in South Africa: A fractional cointegration approach, The Journal of International Trade & Economic Development, 25:7, 978-991, DOI: 10.1080/09638199.2016.1151545. en_ZA
dc.identifier.issn 0963-8199 (print)
dc.identifier.issn 1469-9559 (online)
dc.identifier.other 10.1080/09638199.2016.1151545
dc.language.iso en en_ZA
dc.publisher Routledge en_ZA
dc.rights © 2016 Taylor & Francis. This is an electronic version of an article published in The Journal of International Trade & Economic Development, vol. 25, no. 7, pp. 978-991, 2016. doi : 10.1080/09638199.2016.1151545. The Journal of International Trade & Economic Development is available online at : en_ZA
dc.subject Long memory en_ZA
dc.subject Fractional cointegration en_ZA
dc.subject South Africa (SA) en_ZA
dc.subject Feldstein–Horioka (FH) puzzle en_ZA
dc.title The Feldstein–Horioka puzzle in South Africa : a fractional cointegration approach en_ZA
dc.type Postprint Article en_ZA

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