The saving-investment relationship: Extending the Feldstein-Horioka Hypothesis to the commercial and financial openness status

With this research, in the perspective of the Feldstein-Horioka hypothesis, the effects of openness and country size on the relationship between investment and savings for the period 1990-2019 were classified by income level and analyzed by panel cointegration and causality methods for high-income and middle-high-income country groups. The obtained findings mean that with a high degree of capital mobility, domestic investments are not financed by domestic savings for both country groups. It can be thought that this finding reflects the commercial and financial liberalization movements and reform measures carried out for many years in the country groups examined. While openness rates in high-income countries have no effect on domestic investments, it has been determined that openness rates are a function of domestic investments in middle-high-income countries. As a result of the causality tests, a bidirectional causality relationship between domestic savings and investment was revealed for both country groups.