Capital mobility - econometric approach

Capital is one of the most important productive inputs. In the conditions of globalization it is characterised by a certain mobility degree, which can be a significant factor influencing an economic growth. In general, a more open capital account implies a higher productive performance than economies with restricted capital mobility. But this relation is not straightforward, and there is an empirical evidence that for weaker economies a high degree of capital mobility is not desirable. To measure a degree of capital mobility, a Feldstein - Harioka hypothesis is usually applied: Under perfect capital mobility, domestic savings and investment rates should be uncorrelated. In econometric models, a possible long-run relation between savings and investment is studied by the help of the concept of cointegration. Newly, an importance of comprising foreign direct investment into the cointegration equation is documented. Relevant econometric analysis of capital mobility in Czech Republic and Slovakia is presented.