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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 05 de 2007


European Integration and External Sustainability of the European Union:

An Application of the Thesis of Feldstein-Horioka

(Publicado em Transition Studies Review 15(1): 21-36, 2008)

João Sousa Andrade

GEMF/Faculdade de Economia, Universidade de Coimbra

The Feldstein-Horioka thesis was considered one of the greatest puzzles in economics. Born to measure international capital mobility, has known a process of immunisation to be conformed to empirical evidence and respect econometric knowledge. We apply to EU countries a formulation of the thesis which is adequate to test external sustainability and international capital mobility. Applying appropriate methods we conclude for the external sustainability of enlarged Europe as well as for high level of capital mobility. The capital mobility is more important for the old EU than for the enlarged one.

JEL Classification: E21, E22, F21.

Keywords: Feldstein-Horioka, Capital Mobility, Saving, Investment, External Balance.

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