SAVINGS AND INVESTMENT IN INDIA: THE FELDSTEIN HORIOKA PUZZLE

The main objective of this paper is to investigate the degree of integration of the Indian economy into international capital markets using the analytical frame work proposed by Feldstein Horioka. For this purpose we have used the annual data on savings and investment rates over the period 1970-2012. To examine the time series properties of the data we have employed various unit root and co integration test. The results reveal that there in short run there is moderate capital mobility and long run the savings and investment rates are not moving together indicating the absence of Feldstein Horioka puzzle for the Indian Economy.