European integration and external sustainability of the European Union: an application of the thesis of Feldstein and Horioka

The Feldstein–Horioka thesis was considered one of the greatest puzzles in economics. Formulated to measure international capital mobility, it has known a process of immunization to be conformed to empirical evidence and respect econometric knowledge. We apply to EU countries a formulation of this thesis which is adequate to test external sustainability and measure international capital mobility. Applying appropriate econometric methods we can accept the hypothesis of external unsustainability for the EU before the enlargement. The enlargement allows the external sustainability of the new EU. The lesser mobility of capital in the countries of the enlargement must be considered as a positive shock on EU industry of financial services.