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Current Account Dynamics and the Feldstein and Horioka Puzzle: the Case of Greece

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  • Anastasios Mastroyiannis
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    In this paper we investigate the degree of integration of the Greek economy into international capital markets using the analytical framework proposed by Felstein-Horioka. We examine the time series properties of data on current account balance and national savings for the period 1960-2004. Structural breaks are explicitly taken into account on the basis of the historical evolution of the institutional framework that governs international transactions. The evidence suggests that the links of the Greek economy to international capital markets have significantly strengthened after its accession to the European Union. Furthermore, the empirical results add another piece of evidence - albeit small - to the literature on the Feldstein-Horioka puzzle, indicating that the Feldstein-Horioka puzzle does not hold for the Greek economy.

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    File URL: http://eaces.liuc.it/18242979200701/182429792007040105.pdf
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    Article provided by Cattaneo University (LIUC) in its journal The European Journal of Comparative Economics.

    Volume (Year): 4 (2007)
    Issue (Month): 1 (June)
    Pages: 91-99

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    Handle: RePEc:liu:liucej:v:4:y:2007:i:1:p:91-99
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    1. Charles Engel & Kenneth Kletzer, 1987. "Saving and Investment in an Open Economy with Non-Traded Goods," NBER Working Papers 2141, National Bureau of Economic Research, Inc.
    2. Jansen, W Jos & Schulze, Gunther G, 1996. "Theory-Based Measurement of the Saving-Investment Correlation with an Application to Norway," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 116-132, January.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Corbin, Annie, 2001. "Country specific effect in the Feldstein-Horioka paradox: a panel data analysis," Economics Letters, Elsevier, vol. 72(3), pages 297-302, September.
    5. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
    6. repec:fth:harver:1463 is not listed on IDEAS
    7. Giannone, Domenico & Lenza, Michele, 2008. "The Feldstein-Horioka fact," Working Paper Series 0873, European Central Bank.
    8. Maurice Obstfeld & Kenneth Rogoff & Ben Bernanke & Kenneth Rogoff, "undated". "The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?," Working Paper 32326, Harvard University OpenScholar.
    9. Coakley, Jerry & Kulasi, Farida & Smith, Ron, 1998. "The Feldstein-Horioka Puzzle and Capital Mobility: A Review," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(2), pages 169-188, April.
    10. Ozmen, Erdal & Parmaksiz, Kagan, 2003. "Policy regime change and the Feldstein-Horioka puzzle: the UK evidence," Journal of Policy Modeling, Elsevier, vol. 25(2), pages 137-149, February.
    11. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
    12. Jos Jansen, W, 1996. "Estimating saving-investment correlations: evidence for OECD countries based on an error correction model," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 749-781, October.
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