Exchange rate regimes and the Feldstein-Horioka puzzle: the French evidence

Ozmen E., Parmaksiz K.

APPLIED ECONOMICS, vol.35, no.2, pp.217-222, 2003 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 35 Issue: 2
  • Publication Date: 2003
  • Doi Number: 10.1080/0003684021000025397
  • Journal Name: APPLIED ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.217-222
  • Middle East Technical University Affiliated: Yes

Abstract

This paper investigates whether the Feldstein and Horioka (Economic Journal, 90, 314-29, 1980) argument on domestic saving-investment relationship is supported by the French data when an endogenous structural break corresponding to a major policy regime change is taken into account. The evidence suggests that the saving-investment cointegration disappears after the estimated endogenous structural break point in 1973 coinciding with the end of the Bretton Woods system of fixed exchange rates. Consistent with a current account targeting policy, an investment-driven saving process appears to be the case for the fixed exchange rate regime period.