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Exchange rate regimes and the Feldstein-Horioka puzzle: the French evidence

  • Erdal Ozmen
  • Kağan Parmaksiz

This paper investigates whether the Feldstein and Horioka (Economic Journal, 90, 314-329, 1980) argument on domestic saving-investment relationship is supported by the French data when an endogenous structural break corresponding to a major policy regime change is taken into account. The evidence suggests that the saving-investment cointegration disappears after the estimated endogenous structural break point in 1973 coinciding with the end of the Bretton Woods system of fixed exchange rates. Consistent with a current account targeting policy, an investment-driven saving process appears to be the case for the fixed exchange rate regime period.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684021000025397
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 2 ()
Pages: 217-222

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Handle: RePEc:taf:applec:v:35:y:2003:i:2:p:217-222
DOI: 10.1080/0003684021000025397
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