The global financial crisis and the European single market: The end of integration?

Taufiq Choudhry* (Corresponding Author), Gerhard Kling, Ranadeva Jayasekera

*Corresponding author for this work

Research output: Contribution to journalArticle

7 Citations (Scopus)

Abstract

Using various versions of the Feldstein-Horioka (FH) coefficient, we measure the time-varying degree of capital mobility and economic integration in the European Union. Prior research shows high correlation between domestic investment and savings implying low capital mobility. This surprising result has led to subsequent research on the ?Feldstein-Horioka puzzle?. Our empirical findings show that the puzzle is less puzzling with a coefficient of 0.52 in the period 1990-1995 in EU countries approaching its minimum value of 0.02 in the period 2003-2008. This clearly indicates that the FH coefficient is time-varying signalling a deepening of economic integration in the European Union. Yet, with the advent of the Global Financial Crisis the FH coefficient has increased to 0.26 underlining worrying signs of disintegration.
Original languageEnglish
Pages (from-to)191-196
Number of pages6
JournalJournal of International Money and Finance
Volume49
Issue numberPart B
DOIs
Publication statusPublished - Nov 2014

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