Over recent years, several euro area countries have registered large and persistent net foreign liabilities. This paper examines the risks arising from these external stock imbalances, the prospects for their smooth unwinding and the menu of policy options. The paper demonstrates that external...

We utilize the Feldstein–Horioka puzzle to investigate the impact of regional integration agreements (AFTA, EU, EFTA, CARTAGENA, MERCOSUR and NAFTA) on the international capital mobility. In doing so, we employed a novel empirical technique i.e. the general to specific (GETS) method of Hendry...

Holdings of cross-border bilateral assets are highly responsive to information frictions, market size, transaction costs, and trade ties. But empirical support using transactions data are constrained by the lack of comprehensive bilateral capital flows data covering large sample of economies for...

Unlike the prediction of a frictionless open economy model, long-term average savings and investment rates are highly correlated across countries - a puzzle first identified by Feldstein and Horioka (1980). We quantitatively investigate the impact of two types of financial frictions on this...

Central Bank participants at the BIS 2008 Open Economies Meeting in Punta del Este, Uruguay, discussed trends in capital flows since 2003 and their monetary and financial stability implications. Capital flows appear to be more benign today than in the past, partly because of a greater share of...

We investigate the impact of European Union (EU) integration on capital flows to prospective new EU member states. Using annual data between 1992 and 2020, our results suggest that although EU integration increased net capital flows before the Global Financial Crisis (GFC), it was not able to...

This study investigates whether the Feldstein and Horioka (1980) argument on the domestic saving-investment relationship may remain as a "puzzle" when an endogenous structural break corresponding to a major policy regime change is taken into account. To this end, we employ not only the...

The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on the possible magnitudes is still scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade...

The Eastern enlargement of the European Union (EU) is likely to give a further boost to trade and capital flows, yet empirical evidence on its possible effects is scarce. This paper uses four different datasets to estimate the determinants of international asset holdings and trade flows. We find...

This paper proposes a new method for measuring the degree to which the domestic capital stock is self-financed. The main idea is to use the national accounts to construct a self-financing ratio, indicating what would have been the autarky stock of tangible capital supported by actual past...