The Puzzle of Feldstein-Horioka Evaluation of Advanced Economies: A Panel Data Analysis

The aim of this study is examine the relationship between investment and saving for G7 countries (United States, United Kingdom, Canada, Japan, Italy, France, and Germany) which are classified development countries. Within the scope of the empirical model, primarily heterogeneity of variables studied by using Delta test (Pesaran and Yamagata, 2008). Then, withal CD LM test, it’s decided that model has a cross section dependency. Series were examined by the second generation unit root test (CADF test). After the existence of the cointegration relationship between the series proved by using the Westurlund ECM cointegration test, long-term regression coefficients were estimated by Common Correlated Effects Model. According to the empirical results, for G7 countries capital mobility is comparatively higher.