Capital Mobility in African Countries

Abstract

It is well known that one of the important aspects of achieving sustainable development is to preserve
macroeconomic stability, which is closely related to the extent of capital mobility. Given the importance of the
subject for open economies, this paper examines the degree of capital mobility for African countries by using
among other methodologies the Feldstein- Horioka coefficients. To determine those coefficients, we use time
series data and methods, along with the Dynamic Heterogeneous panel approach. We find significant
cross-country heterogeneity in the dynamic of income per capita, investment rate, and saving rate; and conclude
that it is invalid to pool data across our sample countries. Furthemore, the empirical findings reveal that for
African countries included in the sample, the estimated saving retention coefficients are at the same time, small
and high indicating respectively higher and lower degrees of capital mobility and therefore, challenging the
results of Feldstein – Horioka on developing countries.