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A New Look at the Feldstein-Horioka Puzzle: A “European-Regional” Perspective

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  • Jérôme Héricourt

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Mathilde Maurel

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

The purpose of this paper consists in assessing the extent of financial integration in theEuropean Union using the Feldstein-Horioka criterion applied on regional data from Regioand national statistical offices, over the period 1995-2000. Several important outcomesare reported by our article. First, we find evidence of zero correlation between savingsand investment inside most of the considered countries, and we are able to rationalizethe few puzzles we face. Second, we find that overall financial integration between EUregions is almost complete. After performing additional investigations on consistent subgroupsof regions, our analysis confirms that the suppression of institutional barriers tocapital mobility is a powerful tool to achieve financial integration. However, it may notbe fully sufficient in some circumstances.

Suggested Citation

  • Jérôme Héricourt & Mathilde Maurel, 2006. "A New Look at the Feldstein-Horioka Puzzle: A “European-Regional” Perspective," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00267478, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00267478
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    More about this item

    Keywords

    regional savings; investment; capital market; capital flows;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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