The finding of Feldstein and Horioka (1980) that countriesf investment rates are highly correlated with their national saving rates has by now been confirmed by many subsequent studies, even though their inference that international capital mobility nust be low has not been as widely accepted....

In this essay, we argue that key assumptions in international macroeconomic theory, though useful for understanding the economic relationships among developed countries, have been pushed beyond their competence to include relationships between developed economies and emerging markets. The...