Abstract:

In the case of full capital mobility in the world, it is argued that there will be no relationship between domestic savings and domestic investment in countries, domestic investment will be financed by capital from around the world, and domestic savings will open up to the world for more attractive investment opportunities. Since Feldstein and Horioka (1980) found contrary empirical findings in their research, this situation is referred to as the Feldstein-Horioka (FH) puzzle in the literature. In this study, it is aimed to investigate the savings-investment relationship in Türkiye within the framework of the FH hypothesis after the liberalization of capital movements in 1989. ADF and RALS-ADF unit root and EG (1987) and RALS-EG cointegration tests are applied with annual data for the period 1990-2021. For the first time, the FH hypothesis is investigated with econometric methods based on the RALS procedure with the Türkiye sample. The findings indicate that there is a long-run savings-investment relationship in Türkiye and that domestic savings cover approximately 69 per cent of investments. As a result, the FH hypothesis is valid. In order to ensure permanent economic growth and financial stability in the country, it can be suggested that the balance of domestic and foreign savings should be considered in financing investments, savings should be channeled into long-term productive investments and sudden decisions that would create fragility in financial markets should be avoided.