Khaled A. Hussein

International Capital Mobility in OECD Countries: The Feldstein-Horioka 'Puzzle' Revisited

Abstract We utilise the most recent time series techniques of dynamic OLS and examine international capital mobility across 23 OECD countries. We adopt the saving–investment approach where the endogeneity problem is confronted. Our findings show that capital has been remarkably mobile in most countries over the last three decades.

Explaining differences in the domestic savings ratio across countries: A panel data study

This article seeks to analyse the major determinants of differences in the domestic savings ratio between countries using panel data for 62 countries over the period 1967—95. A basic distinction is made between the determinants of the capacity to save and the willingness to save. The capacity to save depends primarily on the level of per capita income (but non-linearly) and the growth of income (the life-cycle hypothesis), and the empirics strongly support these hypotheses. The willingness to save is assumed to depend on financial variables such as the rate of interest, the level of financial deepening and inflation. We find no support for a positive interest rate effect, but strong support for the level of financial deepening measured by the ratio of quasi-liquid liabilities to GDP. Inflation exerts a mild positive effect on saving but soon turns negative. Total saving may also depend on tax effort, but a surprisingly strong negative relation is found between the ratio of tax revenue to GDP and the domestic savings ratio.

International capital mobility in developing countries; theory and evidence

Despite the importance of international capital mobility in influencing the outcome of stabilization policies, there is little research on the issue in developing countries. This paper tests the degree of capital mobility in nine developing countries, using the intertemporal consumption-smoothing framework. We find considerable evidence to suggest that capital is sufficiently mobile in the countries under examination to facilitate consumption smoothing in the event of shocks to the national cash flow (national income net of private investment and government spending). Our findings also suggest that the impact of shocks to one or more components of the national cash flow on the current account is offset by dynamic responses of other components, such that the current account balance is preserved from drastic movements over time.

The demand for money: Total transactions as the scale variable

Abstract We examine the impact of a direct measure of total transactions in the UK economy on the demand for money by estimating three models (two with proxies for transactions) using the dynamic OLS cointegration technique. The total transactions measure outperforms both proxies.

Is Foreign Debt Portfolio Management Efficient in Emerging Economies

This paper develops a simple model of foreign debt portfolio management. The model suggests that, under mild conditions, the currency composition of a countrys foreign debt portfolio is responsive to exchange rate movements. Empirical evidence is provided for a panel of 14 emerging economies in the period 1970-98. Attention is focused on the stocks of foreign liabilities denominated in U.S. dollars, deutsche marks (DM), Japanese yen, and Swiss francs. The results of the empirical analysis show that foreign debt portfolio management has been sub-optimal in the countries under examination. In these countries, the currency composition of foreign debt has not reflected a substitution effect away from the currencies that have appreciated over time vis-a-vis the U.S. dollar.

The demand for broad money in the UK: does credit matter?

Empirical work based on portfolio theories of the demand for money traditionally treat the quantity of money demanded as the outcome of a decision to allocate a fixed amount of wealth. By contrast, this paper argues that people commonly hold money at the same time that they borrow. Thus changes in gross wealth will cause changes in the quantity of money people wish to hold. This suggests that empirical work in the demand for broad money should pay attention to the cost of credit. We estimate the demand for broad money in the UK (1969Q1-1994Q4) using the recently developed time-series techniques of DOLS and FPLS. Our findings show that the cost of credit variables are important determinants of the demand for real M4 in the UK. In contrast to the recent empirical literature, our results provide strong evidence for the hypothesis that interest rates have a short and long term causal impact on real money demand in the UK.