A Re-Evaluation of the Feldstein-Horioka Puzzle in the Eurozone

23 Pages Posted: 26 Nov 2018

See all articles by Vasilios Plakandaras

Vasilios Plakandaras

Democritus University of Thrace

Periklis Gogas

Democritus University of Thrace - Department of Economics

Theophilos Papadimitriou

Department of Economics, Democritus University of Thrace

Date Written: September 11, 2018

Abstract

In this paper we re-evaluate the capital immobility hypothesis of Feldstein and Horioka (1980) for the case of the European Union and the Eurozone, based on long-run regressions. We employ the Long Run Derivative proposed by Fischer and Seater (1993) in order to examine capital mobility as a long-run phenomenon. In order to enhance the robustness of our results we also perform panel causality tests on our data as it is a common approach in this setting. Our empirical findings provide no evidence in favor of the capital immobility hypothesis. In fact, we reject capital immobility even before the creation of the European Union, the introduction of the Eurozone or the 2008 global financial crisis.

Keywords: Feldstein-Horioka Puzzle, Investment, Savings, International Economics

JEL Classification: F20, F30

Suggested Citation

Plakandaras, Vasilios and Gogas, Periklis and Papadimitriou, Theophilos, A Re-Evaluation of the Feldstein-Horioka Puzzle in the Eurozone (September 11, 2018). Available at SSRN: https://ssrn.com/abstract=3275922 or http://dx.doi.org/10.2139/ssrn.3275922

Vasilios Plakandaras (Contact Author)

Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

Periklis Gogas

Democritus University of Thrace - Department of Economics ( email )

Komotini, 69100
Greece

HOME PAGE: http://www.econ.duth.gr/personel/dep/gkogkas/index.en.shtml

Theophilos Papadimitriou

Department of Economics, Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

HOME PAGE: http://econ.duth.gr/author/papadimi/

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