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Publication Detailed Description
The revival of the Feldstein-Horioka Puzzle and moderation of capital flows after the Global Financial Crisis (2008/09)
Journal Title
Research in International Business and Finance
Year (definitive publication)
2022
Language
English
Country
Netherlands
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Abstract
This study investigates the recent trend of the Feldstein-Horioka puzzle and the underlying reasons for moderation in capital flows. This issue is analysed quite inadequately for the period after the Global Financial Crisis, which represents a crucial turning point for economic climate and policies. The Feldstein-Horioka Puzzle is estimated using the World’s 13 largest economies, with panel GMM regression, between 1996 and 2016. We uncover that the Global Financial Crisis had a persistent detrimental effect on capital liberalization, after which the Feldstein-Horioka puzzle has revived and capital mobility has decreased. We suggest two possible explanations for such moderation in capital flows: the increasing risk perception and risk aversion behaviour of fund supplying countries, which increases the home bias, and capital controls against free flow of capital that have been applied after the Global Financial Crisis of 2008/2009.
Acknowledgements
Alexandra Ferreira-Lopes would like to thank the Portuguese National Science Foundation (FCT), through grant UIDB/00315/2020.
Keywords
Capital mobility,Feldstein-Horioka Puzzle,Panel GMM
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| UIDB/00315/2020 | Fundação para a Ciência e a Tecnologia |
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