Feldstein–Horioka puzzle

The "Feldstein-Horioka puzzle" is the term given for the puzzle, documented by Martin Feldstein and Charles Horioka in their article from 1980 that domestic savings rates and domestic investment rates among OECD countries are highly correlated. According to standard economic theory, in the absence of regulation in international financial markets, the saving of any country would flow to countries with the most productive investment opportunities. Therefore, domestic saving rates would be uncorrelated with domestic investment rates. Since the capital flows between OECD countries are perceived to by reasonably free, this finding is perceived as a puzzle and have given rise to a large literature.