Testing the feldstein-horioka puzzle in the presence of structural breaks : evidence from Algeria

Abstract EN

This paper investigates the Feldstein-Horioka puzzle for Algeria over the period 1970-2019, using time series analysis that allows for structural breaks, and employed Fully Modified Ordinary Least Square (FMOLS) and Dynamic OLS (DOLS) methods.

Two breaking date are identified; 2000 and 2009.

The estimated saving retention coefficients are 0.

99 (0, 97), 0.

49 (0, 49) and 0.

87 (0, 86) based on FMOLS (DOLS) for the period 1970-2000, 2001-2009 and 2010-2019, respectively.

These results means a low capital mobility during the first and the last period.

This is due to the importance of oil rent in Algeria's domestic savings, the unaccomplished structural reforms engaged since the second half of 90s, and the low quality of institutions.

These results have some policy implications.