Can the intertemporal budget constraint explain the Feldstein-Horioka puzzle?

We investigate the small-sample behavior of the cross-sectional saving-investment correlation when saving and investment are cointegrated over time, as is implied by the intertemporal budget constraint. The simulations show that the effect of the intertemporal budget constraint seems strong enough to explain the high correlation of saving and investment across countries (Feldstein-Horioka puzzle).