An Investigation of the Feldstein-Horioka Puzzle for the Association of Southeast Asian Nations Economies

This article reviews the extensive literature on how to respond to the Feldstein-Horioka puzzle. This study quantitatively investigates the impact of instrumental variables on the correlation between domestic savings and investment. I consider two financial frictions: the economic system and the bank features. I find that the dynamic panel model with instrumental variables produces a savings-investment correlation and that information technology generates capital flows to ensure that countries have an incentive to develop. The findings emphasise the potential benefits associated with developing prospects and capital flow in an increasingly competitive emerging market.