Current account deficits in the Euro area
Subtitle: the end of the Feldstein Horioka puzzle?
By: Olivier Blanchard [and] Francesco Giavazzi
Contributors: Giavazzi, Francesco; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 03-05; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 03-05.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2002
Place of publication: Cambridge, MA
Language: eng
Number of pages: 45
Other titles: Current account deficits
Description: Both Portugal and Greece have been running large current account deficits, and these are expected to continue in the future. Yet, financial markets do not appear to be worried. Starting from this observation, we document that Portugal and Greece are in fact representative of a broader evolution: Increasing goods and financial market integration is leading to an increasing decoupling of saving and investment within the European Union, and even more so within the Euro area. In particular, it is allowing poorer countries to invest more, save less, and run larger current account deficits. The converse holds for the richer countries. Keywords: Current Account, Europe, Euro, Feldstein Horioka Puzzle, Saving, Investment, Capital Market Integration, Product Market Integration. JEL Classification: F32, F36, F41, F43.
Notes: Title from cover.

"September 17, 2002."

Includes bibliographical references (p. 44-45).

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.