Abstract:

Along with the collapse of the Bretton Woods system from the end of the 1970s and the increase in global integration, especially in the last fifty years, financial liberalization and globalization have accelerated. In terms of portfolio investments and foreign direct investments, foreign capital flows increased especially in emerging markets with high growth rates and relatively low-cost but skillful labor. Feldstein and Horioka (1980) basically argued that there was an internal relationship from savings to investments. This relationship, which can be explained by a series of sophisticated relations with international economics and macroeconomic processes, has been expressed as the Feldstein - Horioka Puzzle (FHP) in the literature. This study aims to investigate the long-run relationship between national savings and investments in the G8 countries (the USA, Germany, France, England, Italy, Japan, Canada, and Russia). Cross-sectional dependency, Delta Homogeneity, Pesaran (2007) CIPS unit root tests, Westerlund (2007) and Westerlund and Edgerton (2007) Bootstrap Panel Cointegration tests, and finally Emirmahmutoğlu and Köse (2011) Causality tests are performed utilizing the annual data over the period 1996–2020. The obtained results of the study reveal that FHP is not significantly present in the G8 countries. Accordingly, there is no evidence of a direct transfer from savings to investments.