E27 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and ApplicationsReturn

The paper deals with the Feldstein–Horioka puzzle, i.e. the relationship between savings and investment captured by cross-sectional regression. Feldstein and Horioka (1980) considered the regression coefficient as a suitable measure of capital mobility. Although later studies have pointed to different interpretations of the relationship between savings and investment, the basic approach of Feldstein and Horioka is still applied and critically evaluated. The paper is inspired by the basic approach of Feldstein and Horioka to the EU12 countries for the period 1980 to 2018 and the EU28 from 1995 to 2018, and in interpreting the results, the article relies on more recent studies on this topic. Empirically, the importance of major events in the value of the regression coefficient between savings and investment has been proven. However, this time-varying value of the β parameter, could mean variable mobility of capital, but also the preferences of domestic or foreign markets in the creation of the investment portfolio and the application of economic policies.