Advanced Search
MyIDEAS: Login to save this article or follow this journal

A new look at the Feldstein-Horioka puzzle: a European-regional perspective

Contents:

Author Info

  • Jérome Hericourt
  • Mathilde Maurel

Abstract

This paper wants to assess the extent of financial integration in the European Union using the Feldstein-Horioka criterion applied to regional data over the 1995-2000 period. Our article highlights several important outcomes. First, we find evidence that there is no correlation between savings and investment inside most of the considered countries, and we are able to solve the few puzzles facing us. Second, we find that overall financial integration between EU regions is almost complete. Additional investigations on consistent sub-groups of regions confirm that the withdrawal of institutional barriers to capital mobility is a powerful tool to achieve financial integration. However, we show that financial integration as measured by the Feldstein-Horioka relationship is impeded by distance and linguistic diversity, interpreted as proxies for transaction and information costs.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/13220/1/ber-1104.pdf
Download Restriction: no

Bibliographic Info

Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

Volume (Year): 49 (2006)
Issue (Month): 2 ()
Pages: 147-168

as in new window
Handle: RePEc:bxr:bxrceb:y:2006:v:49:i:2:p:147-168

Contact details of provider:
Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be
More information through EDIRC

Related research

Keywords: regional savings; investment; capital market; capital flows;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kim, Sunghyun Henry, 2001. "The saving-investment correlation puzzle is still a puzzle," Journal of International Money and Finance, Elsevier, Elsevier, vol. 20(7), pages 1017-1034, December.
  2. Lothian, James R., 2002. "The internationalization of money and finance and the globalization of financial markets," Journal of International Money and Finance, Elsevier, Elsevier, vol. 21(6), pages 699-724, November.
  3. Martin Feldstein & Philippe Bacchetta, 1989. "National Saving and International Investment," NBER Working Papers 3164, National Bureau of Economic Research, Inc.
  4. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412 National Bureau of Economic Research, Inc.
  5. Lawrence H. Summers, 1988. "Tax Policy and International Competitiveness," NBER Chapters, in: International Aspects of Fiscal Policies, pages 349-386 National Bureau of Economic Research, Inc.
  6. Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, Elsevier, vol. 64(2), pages 335-361, December.
  7. Caporale, Guglielmo Maria & Panopoulou, Ekaterini & Pittis, Nikitas, 2005. "The Feldstein-Horioka puzzle revisited: A Monte Carlo study," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(7), pages 1143-1149, November.
  8. Jeffrey A. Frankel, 1985. "International Capital Mobility and Crowding Out in the U.S. Economy: Imperfect Integration of Financial Markets or of Goods Markets?," NBER Working Papers 1773, National Bureau of Economic Research, Inc.
  9. Sinn, Stefan, 1992. "Saving-Investment Correlations and Capital Mobility: On the Evidence from Annual Data," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 102(414), pages 1162-70, September.
  10. Martin Feldstein, 1991. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 331-353 National Bureau of Economic Research, Inc.
  11. Anindya Banerjee & Paolo Zanghieri, 2003. "A New Look at the Feldstein-Horioka Puzzle using an Integrated Panel," Working Papers 2003-22, CEPII research center.
  12. Frankel, Jeffrey A, 1992. "Measuring International Capital Mobility: A Review," American Economic Review, American Economic Association, American Economic Association, vol. 82(2), pages 197-202, May.
  13. Coakley, Jerry & Kulasi, Farida & Smith, Ron, 1996. "Current Account Solvency and the Feldstein-Horioka Puzzle," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(436), pages 620-27, May.
  14. Iwamoto, Yasushi & van Wincoop, Eric, 2000. "Do Borders Matter? Evidence from Japanese Regional Net Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 241-69, February.
  15. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  16. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9807, Universite de Montreal, Departement de sciences economiques.
  17. Taylor, Alan M., 1998. "Argentina and the world capital market: saving, investment, and international capital mobility in the twentieth century," Journal of Development Economics, Elsevier, Elsevier, vol. 57(1), pages 147-184, October.
  18. Obstfeld, Maurice, 1986. "Capital mobility in the world economy: Theory and measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 24(1), pages 55-103, January.
  19. Murphy, Robert G., 1984. "Capital mobility and the relationship between saving and investment rates in OECD countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 3(3), pages 327-342, December.
  20. Tobin, James, 1983. "'Domestic saving and international capital movements in the long run and the short run' by M. Feldstein," European Economic Review, Elsevier, Elsevier, vol. 21(1-2), pages 153-156.
  21. Bayoumi, Tamim A. & Rose, Andrew K., 1993. "Domestic savings and intra-national capital flows," European Economic Review, Elsevier, Elsevier, vol. 37(6), pages 1197-1202, August.
  22. Eichengreen, Barry, 1990. "Trends and Cycles in Foreign Lending," CEPR Discussion Papers, C.E.P.R. Discussion Papers 451, C.E.P.R. Discussion Papers.
  23. Dekle, Robert, 1996. "Saving-investment associations and capital mobility On the evidence from Japanese regional data," Journal of International Economics, Elsevier, Elsevier, vol. 41(1-2), pages 53-72, August.
  24. Nakamura, Alice & Nakamura, Masao, 1981. "On the Relationships among Several Specification Error Tests Presented by Durbin, Wu, and Hausman," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1583-88, November.
  25. Michael Dooley & Jeffrey Frankel & Donald J. Mathieson, 1987. "International Capital Mobility: What Do Saving-Investment Correlations Tell Us?," IMF Staff Papers, Palgrave Macmillan, vol. 34(3), pages 503-530, September.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bxr:bxrceb:y:2006:v:49:i:2:p:147-168. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.