6533b7d9fe1ef96bd126cdaa
RESEARCH PRODUCT
50 years of capital mobility in the eurozone: breaking the Feldstein-Horioka puzzle
Mariam CamareroAlejandro MuñozCecilio Tamaritsubject
Economics and Econometricscointegrationmultiple structural breaksF36UNESCO::CIENCIAS ECONÓMICASunit rootsF45feldstein-horioka puzzle:CIENCIAS ECONÓMICAS [UNESCO]capital mobilityFeldstein-horioka puzzleO16description
AbstractThis paper assesses capital mobility for the Eurozone countries by studying the long-run relationship between domestic investment and savings for the period 1970-2019. Our main goal is to analyze the impact of economic events on capital mobility during this period. We apply the cointegration methodology in a setting that allows us to identify endogenous breaks in the long-run saving-investment relationship. Precisely, the breaks coincide with relevant economic events. We find a downward trend in the saving-investment retention since the 70s for the so-called “core countries”, whereas this trend is not so evident in the peripheral, where the financial and sovereign crises have had a more substantial impact. In addition, our analysis captures other economic events: the Exchange Rate Mechanism (ERM) crisis, the German reunification, the European financial assistance program, and the post-crisis period. Our results also indicate that the original euro design had some flaws that remain unsolved.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2021-01-01 |