Contents of the volume

2019, Volume 72 - Issue 2

ISSN: 2499-8265
RSS feed citation: At RePEc
Publication date: 02 May 2019


Andrew Phiri

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Abdulnasser Hatemi-J

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Lumengo Bonga-Bonga, Jean Luc Erero

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Chaido Dritsaki

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Richard J. Cebula, Maggie Foley

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Amedeo Amato

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Genoa Chamber of Commerce
Economia Internazionale / International Economics

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Corresponding author

Andrew PHIRI, Department of Economics, Faculty of Business and Economic Studies, Nelson Mandela University, Port Elizabeth, South Africa

The Feldstein-Horioka Puzzle and the Global Financial Crisis: Evidence from South Africa using Asymmetric Cointegration Analysis




In this study we examine the effects of the 2007-2008 global financial crisis on the Feldstein-Horioka coefficient for South Africa using momentum threshold cointegration and error correction techniques applied to quarterly national savings-investment time series collected between 1960:Q1 and 2017:Q1. Our empirical strategy consists of segregating the data into three samples; one corresponding to the full sample (1960:Q1 – 2016:Q4), another corresponding to the pre-crisis period (1960:Q1-2008:Q3) and the last corresponding to the post-crisis period (2008:Q4-2016:Q4). Our empirical results validate asymmetric cointegration effects for both the full and the pre-crisis periods while only accepting a linear cointegration relation for the post-crisis period. The saving-retention coefficient estimates produced are 0.59 (significant), 0.64 (significant), and 0.22 (insignificant) for the full, pre-crisis and post-crisis periods, respectively. These results imply that international capital mobility has increased in the post-crisis period and this may be primarily due to the effects of a redirection of private capital flows by investors to safe haven assets. Therefore policy plans of further relaxing capital controls is inadvisable considering that capital is already highly mobile.

JEL classification

C22, C52, F21, F41


Investment, Savings, Feldstein-Horioka Puzzle, Threshold Cointegration, Threshold Error Correction Model, Sub-Saharan Africa, South Africa


  1. Introduction
  2. Literature review
  3. Empirical specification and modeling techniques
  4. Data and empirical results
  5. Conclusions


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