Capital Mobility in the APEC Region: A Consumption-Based Approach and New Empirical Evidence

This study explores the degree of capital mobility in selected APEC economies over the period 2000–2023, using a consumption-based approach. The motivation stems from the well-known limitations of the traditional investment–saving framework associated with the Feldstein–Horioka puzzle, which may not fully capture how capital actually moves across borders. To address this issue, the paper adopts an alternative perspective by examining how domestic consumption responds to external consumption patterns relative to domestic income. The analysis focuses on six economies, including both developed countries (the United States, Canada, and Australia) and developing countries (Chile, Thailand, and Indonesia), allowing for a meaningful comparison across different levels of economic development. The findings indicate that capital is indeed mobile, but not perfectly so. More notably, the results suggest that capital mobility tends to be stronger in developing economies than in developed ones. This outcome challenges conventional expectations based on standard measures of financial openness and highlights the gap between formal financial liberalization and actual capital movement in practice. Overall, the study provides a deeper understanding of capital mobility and offers useful insights for policymakers seeking to enhance financial integration and improve the effectiveness of capital flow management, particularly in developing economies.