WHAT DO SAVING INVESTMENT RELATIONSHIPS TELL US ABOUT CAPITAL MOBILITY

This paper re-examines the tests of international capital mobility based on saving-investment regressions originated by Feldstein. While analyses of various measures of capital controls provide some support for the Feldstein hypothesis, it is shown that the existence of nontraded goods can independently lead to a saving-investment correlation. This theoretical critique is supported empirically. An analysis of the stability of the coefficients resolves the oft-reported puzzle in the literature that economies appear to have become increasingly closed financially over time. © 1990.