Reassessing International Capital Mobility: The Feldstein-Horioka Puzzle Disappears‪?‬

Abstract Financial globalization, apart from creating new opportunities for investors, also exposes the economy to financial crises. The present study proposes a model that captures the dynamics of financial integration in developed countries over a period of thirty four years. The results show that the mid-nineties, marking the era of globalization, were also characterized by unprecedented increases in global capital mobility as reflected in saving-investment correlation coefficients. In doing so, the 'study is able to establish the possibility that the well-known Feldstein-Horioka puzzle does not exist any longer.