Investment and saving and the euro crisis: A new look at Feldstein–Horioka

• Feldstein and Horioka relationship between investment and saving remains positive.
• Investment and saving have become more linked during the euro crisis.
• This implies that capital mobility was diminished.
• Portugal, Ireland, Italy, Greece, and Spain were particularly impacted.

We examine the relationship between investment and saving for a cross section of European countries before and during the euro crisis. As has historically been found, investment is positively and significantly related to saving. This relationship shows evidence of being stronger during the height of the euro crisis. This increase is a departure from a general decline in the relationship over time.