Abstract

http://ssrn.com/abstract=372880
 
 

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Current Account Deficits in the Euro Area. The End of the Feldstein Horioka Puzzle?


Olivier J. Blanchard


Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); International Monetary Fund (IMF)

Francesco Giavazzi


Bocconi University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

September 17, 2002

MIT Department of Economics Working Paper No. 03-05

Abstract:     
Both Portugal and Greece have been running large current account deficits, and these are expected to continue in the future. Yet, financial markets do not appear to be worried. Starting from this observation, we document that Portugal and Greece are in fact representative of a broader evolution: Increasing goods and financial market integration is leading to an increasing decoupling of saving and investment within the European Union, and even more so within the Euro area. In particular, it is allowing poorer countries to invest more, save less, and run larger current account deficits. The converse holds for the richer countries.

Number of Pages in PDF File: 56

Keywords: Current Account, Europe, Euro, Feldstein Horioka Puzzle, Saving, Investment, Capital Market Integration, Product Market Integration

JEL Classification: F32, F36, F41, F43

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Date posted: January 23, 2003  

Suggested Citation

Blanchard, Olivier J. and Giavazzi, Francesco, Current Account Deficits in the Euro Area. The End of the Feldstein Horioka Puzzle? (September 17, 2002). MIT Department of Economics Working Paper No. 03-05. Available at SSRN: http://ssrn.com/abstract=372880 or http://dx.doi.org/10.2139/ssrn.372880

Contact Information

Olivier J. Blanchard (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
Room E52-357
50 Memorial Drive
Cambridge, MA 02142
United States
617-253-8891 (Phone)
617-253-4096 (Fax)
HOME PAGE: http://mit.edu/blanchar/www/
National Bureau of Economic Research (NBER)
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Cambridge, MA 02138
United States
International Monetary Fund (IMF) ( email )
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Washington, DC 20431
United States
202 623 7825 (Phone)
202 623 7271 (Fax)
Francesco Giavazzi
Bocconi University - Department of Economics ( email )
Via Gobbi 5
Milan, 20136
Italy
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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