Note 3-37

(37) By using OECD samples (estimation period: 19601974), Feldstein-Horioka (1980) estimated a regression equation ((I/Y)i=+*(S/Y)i+i), with investment rate (I/Y) being a dependent variable and savings rate (S/Y) being an explanatory variable. It found that the coefficient of the savings rate to fluctuations of the investment rate is close to 1, standing at 0.887 when gross investment rate and gross savings rate were used and at 0.938 when net investment and net savings rate were used. Even if the sample period was set off at a 5-year interval, similar results were obtained. Therefore, it strongly rejected the hypothesis that international capital mobility is completely free (Feldstein-Horioka paradox). See Kitamura-Fujiki (1995) for problems involved in drawing such a conclusion.