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

Taufiq Choudhry; Gerhard Kling; Ranadeva Jayasekera

doi:10.1016/j.jimonfin.2014.08.002

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 journal › Article

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 language	English
Pages (from-to)	191-196
Number of pages	6
Journal	Journal of International Money and Finance
Volume	49
Issue number	Part B
DOIs	https://doi.org/10.1016/j.jimonfin.2014.08.002
Publication status	Published - Nov 2014

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http://eprints.soas.ac.uk/19029/

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Choudhry, T., Kling, G., & Jayasekera, R. (2014). The global financial crisis and the European single market: The end of integration? Journal of International Money and Finance, 49(Part B), 191-196. https://doi.org/10.1016/j.jimonfin.2014.08.002

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title = "The global financial crisis and the European single market: The end of integration?",

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.",

author = "Taufiq Choudhry and Gerhard Kling and Ranadeva Jayasekera",

note = "Acknowledgements We also would like to thank the Money Macro and Finance Research Group for their support in organising this conference. We are very pleased and grateful that Professor James Lothian (Fordham University, USA) delivered the keynote speech, and Professor Charles Goodhart (London Business School) presented the lunch time seminar. We are very grateful to our sponsors, the Journal of Inter-national Money and Finance, the Money Macro and Finance Research Group, the Bank of England, Bloomberg and the School of Management,University of Southampton. ",

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AU - Jayasekera, Ranadeva

N1 - Acknowledgements We also would like to thank the Money Macro and Finance Research Group for their support in organising this conference. We are very pleased and grateful that Professor James Lothian (Fordham University, USA) delivered the keynote speech, and Professor Charles Goodhart (London Business School) presented the lunch time seminar. We are very grateful to our sponsors, the Journal of Inter-national Money and Finance, the Money Macro and Finance Research Group, the Bank of England, Bloomberg and the School of Management,University of Southampton.

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N2 - 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.

AB - 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.

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