Feldstein-Horioka corelation: indicator of capital mobility or solvency?

Vol. 23 No. 1 (2003)

Jan-Mar / 2003
Published January 1, 2003
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Rocha, Fabiana. 2003. “Feldstein-Horioka Corelation: Indicator of Capital Mobility or Solvency?”. Brazilian Journal of Political Economy 23 (1):3-11. https://doi.org/10.1590/0101-31572004-0702.

Feldstein-Horioka corelation: indicator of capital mobility or solvency?

Fabiana Rocha
Departamento de Economia, Universidade de São Paulo, São Paulo/SP, Brasil.
Brazilian Journal of Political Economy, Vol. 23 No. 1 (2003), Jan-Mar / 2003, Pages 3-11


The purpose of this paper is to use the intertemporal open macro models, and the solvency econometric tests derived from them, to analyze the original Feldstein and Horioka saving-investment correlation. The solvency constraint implies that saving and investment are cointegrated with a coefficient of one and, therefore, that the current account is stationary. Since the Feldstein-Horioka cross-section regression measures the average longrun coefficient, it is possible then to argue that it is capturing the unit coefficient implied by the solvency constraint and not some measure of capital mobility.

JEL Classification: C23; F31.

Keywords: Capital mobility solvency Feldstein-Horioka