Co-Integration Between Savings and Investment in India and the US: An Econometric Analysis of Feldstein-Horioka Hypothesis

Authors

Narender Thakur Ph.D., University of DelhiFollow
Vishnu Das Gupta

Keywords

Feldstein-Horioka Hypotheses, Savings, Investment, Capital Mobility, India and US

Abstract

This paper econometrically tests the Feldstein-Horioka hypotheses. It uses the domestic savings and domestic investments variables in India and the US in the period 1960- 2014. The Feldstein-Horioka hypotheses states that the cointegration relationship between domestic savings and domestic investments weakens in a country with higher foreign capital mobility and vice-versa. We find that the co-integration relation between the two time-series variables is weakened in the case of the US economy as compared to the Indian economy. These results have policy implications for India as it is opening itself up more to inward foreign investment.

DOI Link

https://doi.org/10.56902/IRBE.2018.2.1.1

Recommended Citation

Thakur, Narender Ph.D. and Gupta, Vishnu Das (2018) "Co-Integration Between Savings and Investment in India and the US: An Econometric Analysis of Feldstein-Horioka Hypothesis," International Review of Business and Economics: Vol. 2: Iss. 1, Article 1.