Capital Mobility in Emerging Europe

Panel cointegration methods are used to analyze the saving and investment relationships of the EU member countries; the degree of capital mobility is investigated by pooled mean group estimation. Results demonstrate that although saving and investment move together in the long run, there is also a moderate level of capital mobility in the short run, suggesting that the Feldstein-Horioka puzzle is not valid for these countries in the 1980-2012 period. Results differ in the subsamples of the European Union as the degree of capital mobility is higher in the eurozone countries and early members of the European Union.