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

Erdal Ozmen () and Kağan Parmaksiz

Applied Economics, 2003, vol. 35, issue 2, 217-222

Abstract: This paper investigates whether the Feldstein and Horioka (Economic Journal, 90, 314-329, 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.

Date: 2003
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DOI: 10.1080/0003684021000025397

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