Why the Feldstein-Horioka “Puzzle” Remains Unsolved

• Main Authors: Felipe, Jesus, Fullwiler, Scott, Yusoph, Al-Habbyel
• Format: text
• Published: Animo Repository 2022
• Subjects: accounting identity; Feldstein-Horioka paradox (puzzle); investment; pseudo bias; saving
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/3; https://animorepository.dlsu.edu.ph/context/res_aki/article/1002/viewcontent/dlsu_aki_working_paper_series_2022_06_084.pdf
• Institution: De La Salle University

This paper argues that the 40-year-old Feldstein-Horioka “puzzle” (i.e., in a regression of the domestic investment rate on the domestic saving rate, the estimated coefficient is significantly larger than expected in a world with high capital mobility) should have never been labeled as such. First,...