International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis

Christopher N. Ekong; Kenneth U. Onye

doi:doi:10.11648/j.sjbm.20150304.14

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International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis

Christopher N. Ekong, Kenneth U. Onye

Published in Science Journal of Business and Management (Volume 3, Issue 4)

Received: 14 May 2015 Accepted: 1 June 2015 Published: 25 July 2015

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Abstract

This paper tests the validity of Feldstein-Horioka (1980) hypothesis using Nigerian data from 1980 to 2013 by relying on the ARDL Bounds testing approach to co-integration and vector error correction model (VECM). Evidence for the hypothesis over the sub-samples is mixed given absence of co-integrating relationship between savings and investment in both periods. Over the period of market-friendly economic reform (1986 -2013) and entire sample period (1980-2013), we found low saving investment correlation indicating support for the F-H hypothesis (that low saving investment relationship implies high degree of international capital mobility). Presumably, the World Bank and IMF designed economic reform programs in form of liberalization and deregulation – coupled with the neo-liberal economic management framework that Nigeria is currently practicing – may have attenuated the saving investment relation in the reform era, thereby providing support for F-H hypothesis over the reform era. But the finding of similar absence of cointegration between saving and investment in the pre-reform era, against the F-H postulate, reveals the importance of incorporating factors such as money supply and inflow of foreign capital that could affect the saving investment relationship as widely suggested in the literature. Overall, we find support for high degree of international capital mobility across Nigerian borders that may lead to unsustainable current account balance for the economy if left unregulated. The policy import of the paper is the need for a more conscientious implementation of a policy of guided deregulation of Nigeria’s capital and trade accounts.

Published in	Science Journal of Business and Management (Volume 3, Issue 4)
DOI	10.11648/j.sjbm.20150304.14
Page(s)	116-126
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Capital Mobility, F-H Hypothesis, ARDL Model, Nigeria, VECM, Bounds Test

References

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APA Style

Christopher N. Ekong, Kenneth U. Onye. (2015). International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis. Science Journal of Business and Management, 3(4), 116-126. https://doi.org/10.11648/j.sjbm.20150304.14

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ACS Style

Christopher N. Ekong; Kenneth U. Onye. International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis. Sci. J. Bus. Manag. 2015, 3(4), 116-126. doi: 10.11648/j.sjbm.20150304.14

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AMA Style

Christopher N. Ekong, Kenneth U. Onye. International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis. Sci J Bus Manag. 2015;3(4):116-126. doi: 10.11648/j.sjbm.20150304.14

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@article{10.11648/j.sjbm.20150304.14,
  author = {Christopher N. Ekong and Kenneth U. Onye},
  title = {International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis},
  journal = {Science Journal of Business and Management},
  volume = {3},
  number = {4},
  pages = {116-126},
  doi = {10.11648/j.sjbm.20150304.14},
  url = {https://doi.org/10.11648/j.sjbm.20150304.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20150304.14},
  abstract = {This paper tests the validity of Feldstein-Horioka (1980) hypothesis using Nigerian data from 1980 to 2013 by relying on the ARDL Bounds testing approach to co-integration and vector error correction model (VECM). Evidence for the hypothesis over the sub-samples is mixed given absence of co-integrating relationship between savings and investment in both periods. Over the period of market-friendly economic reform (1986 -2013) and entire sample period (1980-2013), we found low saving investment correlation indicating support for the F-H hypothesis (that low saving investment relationship implies high degree of international capital mobility). Presumably, the World Bank and IMF designed economic reform programs in form of liberalization and deregulation – coupled with the neo-liberal economic management framework that Nigeria is currently practicing – may have attenuated the saving investment relation in the reform era, thereby providing support for F-H hypothesis over the reform era. But the finding of similar absence of cointegration between saving and investment in the pre-reform era, against the F-H postulate, reveals the importance of incorporating factors such as money supply and inflow of foreign capital that could affect the saving investment relationship as widely suggested in the literature. Overall, we find support for high degree of international capital mobility across Nigerian borders that may lead to unsustainable current account balance for the economy if left unregulated. The policy import of the paper is the need for a more conscientious implementation of a policy of guided deregulation of Nigeria’s capital and trade accounts.},
 year = {2015}
}

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TY  - JOUR
T1  - International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis
AU  - Christopher N. Ekong
AU  - Kenneth U. Onye
Y1  - 2015/07/25
PY  - 2015
N1  - https://doi.org/10.11648/j.sjbm.20150304.14
DO  - 10.11648/j.sjbm.20150304.14
T2  - Science Journal of Business and Management
JF  - Science Journal of Business and Management
JO  - Science Journal of Business and Management
SP  - 116
EP  - 126
PB  - Science Publishing Group
SN  - 2331-0634
UR  - https://doi.org/10.11648/j.sjbm.20150304.14
AB  - This paper tests the validity of Feldstein-Horioka (1980) hypothesis using Nigerian data from 1980 to 2013 by relying on the ARDL Bounds testing approach to co-integration and vector error correction model (VECM). Evidence for the hypothesis over the sub-samples is mixed given absence of co-integrating relationship between savings and investment in both periods. Over the period of market-friendly economic reform (1986 -2013) and entire sample period (1980-2013), we found low saving investment correlation indicating support for the F-H hypothesis (that low saving investment relationship implies high degree of international capital mobility). Presumably, the World Bank and IMF designed economic reform programs in form of liberalization and deregulation – coupled with the neo-liberal economic management framework that Nigeria is currently practicing – may have attenuated the saving investment relation in the reform era, thereby providing support for F-H hypothesis over the reform era. But the finding of similar absence of cointegration between saving and investment in the pre-reform era, against the F-H postulate, reveals the importance of incorporating factors such as money supply and inflow of foreign capital that could affect the saving investment relationship as widely suggested in the literature. Overall, we find support for high degree of international capital mobility across Nigerian borders that may lead to unsustainable current account balance for the economy if left unregulated. The policy import of the paper is the need for a more conscientious implementation of a policy of guided deregulation of Nigeria’s capital and trade accounts.
VL  - 3
IS  - 4
ER  -

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Author Information

Christopher N. Ekong

Department of Economics, Faculty of Social Sciences, University of Uyo, Uyo, Nigeria
Kenneth U. Onye

Department of Economics, Faculty of Social Sciences, University of Uyo, Uyo, Nigeria

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APA Style

Christopher N. Ekong, Kenneth U. Onye. (2015). International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis. Science Journal of Business and Management, 3(4), 116-126. https://doi.org/10.11648/j.sjbm.20150304.14

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ACS Style

Christopher N. Ekong; Kenneth U. Onye. International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis. Sci. J. Bus. Manag. 2015, 3(4), 116-126. doi: 10.11648/j.sjbm.20150304.14

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AMA Style

Christopher N. Ekong, Kenneth U. Onye. International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis. Sci J Bus Manag. 2015;3(4):116-126. doi: 10.11648/j.sjbm.20150304.14

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@article{10.11648/j.sjbm.20150304.14,
  author = {Christopher N. Ekong and Kenneth U. Onye},
  title = {International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis},
  journal = {Science Journal of Business and Management},
  volume = {3},
  number = {4},
  pages = {116-126},
  doi = {10.11648/j.sjbm.20150304.14},
  url = {https://doi.org/10.11648/j.sjbm.20150304.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20150304.14},
  abstract = {This paper tests the validity of Feldstein-Horioka (1980) hypothesis using Nigerian data from 1980 to 2013 by relying on the ARDL Bounds testing approach to co-integration and vector error correction model (VECM). Evidence for the hypothesis over the sub-samples is mixed given absence of co-integrating relationship between savings and investment in both periods. Over the period of market-friendly economic reform (1986 -2013) and entire sample period (1980-2013), we found low saving investment correlation indicating support for the F-H hypothesis (that low saving investment relationship implies high degree of international capital mobility). Presumably, the World Bank and IMF designed economic reform programs in form of liberalization and deregulation – coupled with the neo-liberal economic management framework that Nigeria is currently practicing – may have attenuated the saving investment relation in the reform era, thereby providing support for F-H hypothesis over the reform era. But the finding of similar absence of cointegration between saving and investment in the pre-reform era, against the F-H postulate, reveals the importance of incorporating factors such as money supply and inflow of foreign capital that could affect the saving investment relationship as widely suggested in the literature. Overall, we find support for high degree of international capital mobility across Nigerian borders that may lead to unsustainable current account balance for the economy if left unregulated. The policy import of the paper is the need for a more conscientious implementation of a policy of guided deregulation of Nigeria’s capital and trade accounts.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - International Capital Mobility and Saving-Investment Nexus in Nigeria: Revisiting Feldstein-Horioka Hypothesis
AU  - Christopher N. Ekong
AU  - Kenneth U. Onye
Y1  - 2015/07/25
PY  - 2015
N1  - https://doi.org/10.11648/j.sjbm.20150304.14
DO  - 10.11648/j.sjbm.20150304.14
T2  - Science Journal of Business and Management
JF  - Science Journal of Business and Management
JO  - Science Journal of Business and Management
SP  - 116
EP  - 126
PB  - Science Publishing Group
SN  - 2331-0634
UR  - https://doi.org/10.11648/j.sjbm.20150304.14
AB  - This paper tests the validity of Feldstein-Horioka (1980) hypothesis using Nigerian data from 1980 to 2013 by relying on the ARDL Bounds testing approach to co-integration and vector error correction model (VECM). Evidence for the hypothesis over the sub-samples is mixed given absence of co-integrating relationship between savings and investment in both periods. Over the period of market-friendly economic reform (1986 -2013) and entire sample period (1980-2013), we found low saving investment correlation indicating support for the F-H hypothesis (that low saving investment relationship implies high degree of international capital mobility). Presumably, the World Bank and IMF designed economic reform programs in form of liberalization and deregulation – coupled with the neo-liberal economic management framework that Nigeria is currently practicing – may have attenuated the saving investment relation in the reform era, thereby providing support for F-H hypothesis over the reform era. But the finding of similar absence of cointegration between saving and investment in the pre-reform era, against the F-H postulate, reveals the importance of incorporating factors such as money supply and inflow of foreign capital that could affect the saving investment relationship as widely suggested in the literature. Overall, we find support for high degree of international capital mobility across Nigerian borders that may lead to unsustainable current account balance for the economy if left unregulated. The policy import of the paper is the need for a more conscientious implementation of a policy of guided deregulation of Nigeria’s capital and trade accounts.
VL  - 3
IS  - 4
ER  -

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