VALIDITY OF F-H PUZZLE IN PAKISTAN ECONOMY: A TIME SERIES STUDY
Download| Volume 13 Issue 1 2017 | |
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| Author(s): |
Haris Masood
Muhammad Waqas
Masood Anwer
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| Abstract | The objective of this paper is to examine the validity of the F-H puzzle in the context of Pakistan. In this study, the Feldstein-Horioko puzzle investigated in Pakistan states that the existence of a relationship between saving and investment is the indication of capital immobility. The data of gross domestic product saving, capital formation, and current account from 1980 to 2016 were collected from the State Bank of Pakistan, IMF outlook database, and Economic Survey of Pakistan. The ADF and PP tests were used to find out the stationarity of the variables. Famous Johansen cointegration is used to check the long-run relationship between saving and investment and between current account and investment. The results of the unit root test indicate that all the variables are stationary at their first difference. The empirical results of the cointegration test show that there is no long-run relation exist between saving and investment and long-run relationship exist between current account and investment which does not support the findings of the F-H puzzle and shows that capital is perfectly mobile in the case of the Pakistani economy. |
| Keywords | F-H Puzzle, Feldstein-Horioko puzzle, cointegration |
| Year | 2017 |
| Volume | 13 |
| Issue | 1 |
| Type | Short Report |
| Recognized by | Higher Education Commission of Pakistan, HEC | Category | "Y" | Journal Name | IBT Journal of Business Studies | Publisher Name | ILMA University | Jel Classification | O16, O23 | DOI | http://dx.doi.org/10.46745/ilma.jbs.2017.13.01.07 | ISSN no (E, Electronic) | 2409-6520 | ISSN no (P, Print) | 2416-8393 | Country | Pakistan | City | Karachi | Institution Type | University | Journal Type | Open Access | Type of Review | Double Blind Peer Reviewed | Format | Paper Link | http://ibtjbs.ilmauniversity.edu.pk/journal/jbs/13.1/7.pdf | Page | 89-96 | Reference | Adedeji, O. and Thornton, J. (2008) International capital mobility: Evidence from panel co- integration tests. Economics Letters, 99(2), pp.349-352. Alexiou, C. (2002) An Econometric investigation in to the macroeconomics relationship between investment and saving: Evidence from EU region, Queen Mary Working paper, March, 445, pp.1-18. Baxter, M. and Crucini, M. 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