Fazio, Giorgio; Mac Donald, Ronald; Melitz, Jacques - Centre de Recherche en Économie et Statistique … - 2005
In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that tradecosts are the key to explaining the so-called Feldstein-Horioka puzzle. Using a gravityframework in an intertemporal context, we provide strong support for the hypothesis and wereconcile our results with the...