Question: It has been argued that the high correlation between national saving and national investment that Feldstein and Horioka first measured in 1980 is not evidence

It has been argued that the high correlation between national saving and national investment that Feldstein and Horioka first measured in 1980 is not evidence of imperfect capital mobility. What arguments can you offer for why they might have misinterpreted the data, and what do recent investigations of this issue imply about the degree of capital mobility throughout the world?

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There are several important caveats to the Feldstein and Horioka interpretation that have been noted in the literature One line of argument asserts th... View full answer

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