The Feldstein-Horioka hypothesis versus the long-run solvency constraint model: A critical assessment

This paper proposes an extended version of the long-run solvency constraint model developed by Coakley et al. [Coakley, J., Kulasi, F., Smith, R., 1996. Current Account Solvency and the Feldstein-Horioka Puzzle, Economic Journal 106, 620-627.] that provides a theoretical, and empirically testable, distinction from the Feldstein-Horioka hypothesis. The empirical application shows that the Feldstein-Horioka approach presents a useful, but incomplete, measure of capital mobility in 6 OECD countries.