Testing the validity of the Feldstein-Horioka puzzle for Australia
Kumar, S. , Webber, D. J. and Fargher, S. (2012) Testing the validity of the Feldstein-Horioka puzzle for Australia. Applied Economics, 44 (5). pp. 599-605. ISSN 0003-6846
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Publisher's URL: http://dx.doi.org/10.1080/00036846.2010.511993
This paper presents an investigation into the relationship between investment and savings in Australia over the period 1960-2007. Using five time series techniques our results reveal that the Feldstein-Horioka puzzle exists in a weak form with a lower saving retention coefficient. Granger Causality tests illustrate that savings Granger causes investment both in the short and long runs. Our results suggest Australia could effectively adopt policies that focus on increasing investment through increasing domestic savings
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