The Feldstein–Horioka puzzle is a widely discussed problem in macroeconomics and international finance, which was first documented by Martin Feldstein and Charles Horioka in a 1980 paper.
In other words, money flows from lower to higher marginal products until the increased investment equalizes the return with that obtainable elsewhere.
Feldstein and Horioka argued that if the assumption is true and there is perfect capital mobility, we should observe low correlation between domestic investment and savings.
Feldstein and Horioka's assumption of perfect capital mobility discounts factors such as: All these apply to the hypothetical rational investor.
Economists Claudio Borio and Piti Disyatat of the Bank for International Settlements have argued that the Feldstein–Horioka puzzle arises due to mainstream economic modeling approaches which equate saving in real terms with financing in money terms.