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Title: The revival of the Feldstein-Horioka puzzle and moderation of capital flows after the global financial crisis
Authors: Duran, Hasan Engin
Ferreira-Lopes, Alexandra
Izmir Institute of Technology
Instituto Universitário de Lisboa
Keywords: Capital Mobility
Feldstein-Horioka Puzzle
Panel GMM
Issue Date: Apr-2022
Publisher: Elsevier
Abstract: This study investigates the recent trend of the Feldstein-Horioka puzzle and the underlying reasons for moderation in capital flows. This issue is analysed quite inadequately for the period after the Global Financial Crisis, which represents a crucial turning point for economic climate and policies. The Feldstein-Horioka Puzzle is estimated using the World's 13 largest economies, with panel GMM regression, between 1996 and 2016. We uncover that the Global Financial Crisis had a persistent detrimental effect on capital liberalization, after which the Feldstein-Horioka puzzle has revived and capital mobility has decreased. We suggest two possible explanations for such moderation in capital flows: the increasing risk perception and risk aversion behaviour of fund supplying countries, which increases the home bias, and capital controls against free flow of capital that have been applied after the Global Financial Crisis of 2008/2009.
Appears in Collections:City and Regional Planning / Şehir ve Bölge Planlama
Scopus İndeksli Yayınlar Koleksiyonu / Scopus Indexed Publications Collection
WoS İndeksli Yayınlar Koleksiyonu / WoS Indexed Publications Collection

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