Policy regime change and the Feldstein–Horioka puzzle: the UK evidence

摘要: Abstract This study investigates whether the Feldstein and Horioka [Econ. J. 90 (1980) 314.] argument on domestic saving–investment relationship may remain as a “puzzle” when an endogenous structural break corresponding to major policy regime change is taken into account. To this end, we employ not only conventional procedures developed for data generation process without break, but also some recent methods which allow stationarity around under alternative hypothesis. The evidence based UK annual from 1948 1998 suggests that long-run between saving investment disappears after estimated point coinciding with abolition of foreign exchange controls in 1979.