50 Years of Capital Mobility in the Eurozone: Breaking the Feldstein‑Horioka Puzzle

This paper, based on Camarero et al. (2022), assesses capital mobility for the Eurozone countries by studying the long-run relationship between domestic investment and savings for the period 1970-2019. Our main goal is to analyze the impact of economic events on capital mobility during this period. We apply the cointegration methodology accounting for endogenous breaks in the long-run saving-investment relationship that coincide with relevant economic events. We find a downward trend in the saving-investment retention since the 70s for the so-called “core countries”, whereas this trend is not so evident in the peripheral, where the financial and sovereign crises ( i. ex. ERM crisis, German unification, Euro debt crisis…) have had a more substantial impact. Our results also indicate that the original euro design had some flaws that remain unsolved.