Impact of the Global Financial Crisis on the Level of Capital Mobility in EU Members

This study investigates the level of capital mobility in European Union members and the impact of the global financial crisis on the capital mobility indicators. The capital mobility is examined by testing the Feldstein-Horioka puzzle. This study estimates quarterly data for 27 European countries for the period of 1995-2013 and employs the standard and dynamic generalized method of moments (GMM) estimation techniques. The results of the standard GMM estimations did not provide the evidence to support the Feldstein-Horioka puzzle, where the saving retention coefficient demonstrates the high capital mobility in European Union countries. However the results of the dynamic GMM estimations indicates that inclusion of historical values of investment and savings in the regression decreases the level of capital mobility in European countries. The consideration of the global financial crisis in the model revealed insignificant changes in capital mobility indicators, which means that the inclusion of the global financial crisis does not have an impact on the capital mobility analysis in European countries