Greece’s Accession to the EU: Savings-Investment dynamics

Abstract

In this paper we investigate the degree of integration of the Greek economy into international capital markets, using the analytical framework proposed by Felstein-Horioka. We examine the saving-investment relationship using and error correction model and taking into account the time profile of the institutional framework that governs current and capital account transactions. The results indicate a significant increase in the degree of integration of the Greek economy into the international capital market after 1992. Furthermore, the empirical results add another piece of evidence –albeit small- to the literature on the Feldstein-Horioka puzzle, indicating that the Feldstein-Horioka puzzle does not hold for the Greek economy.