Volume 13 Issue 1 2017


Haris Masood
Assistant Professor, Institute of Business and Technology.

Muhammad Waqas
Lecturer Economics Institute of Business and Technology.

Masood Anwer
Director ORIC, Institute of Business and Technology.

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
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 PDF
Paper Link
Page 89-96
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