The European Journal of Comparative Economics

ISSN: 1824-2979

EJCE Year: 2007, June. Volume: 4 - Issue: 1

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

by Anastasios Mastroyiannis

Start page: 91 - End page: 99

Keywords: Current Account Balance; Savings; Feldstein-Horioka puzzle; Greece

Jel code: F32; F41

Abstract:

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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