Purpose: The purpose of this study is to examine two issues, namely the degree of current account deficit (CAD) sustainability and the degree of capital mobility.Design/methodology/approach: The sample for this study comprises 24 Latin American and Caribbean countries, including three regional agreements: Andean Community, MERCOSUR (Mercado Común del Sur), and SICA (Central American Integration System). This study employs the dynamic common correlated effects mean group (DCCEMG) estimator in a panel data set to investigate the long-run relationship between savings and investment along with short-run dynamics.Findings: The findings indicate that CAD is weakly sustainable in the Latin American and Caribbean region, MERCOSUR, and SICA, while CAD is strongly unsustainable in the Andean Community. The sub-period analysis reveals that CAD has been adversely affected by the 2008 crisis. However, in the post-crisis period, CAD has been slowly decreasing in the Latin American and Caribbean region and Andean Community, whereas CAD has continued increasing in MERCOSUR and SICA. Further, the estimates of error-correction terms and short-run coefficients indicate that the Andean Community and MERCOSUR observe a higher degree of long-run and short-run capital mobility than SICA.Practical implications: The results carry fundamental implications for policy-making processes aimed at maintaining sustainable CADs.Originality/value: This study gives an alternative interpretation of the “Feldstein-Horioka” coefficient in terms of CAD sustainability and analyses the saving–investment relationship in light of Chudik and Pesaran (2015).

This study examines the role of global, regional and domestic saving for domestic investment financing in the panel of Latin American and Caribbean countries along with its three regional integration blocks, namely SICA, Andean Community and MERCOSUR. Panel regression and rolling-window estimation results reveal that global saving is the main source of domestic investment financing in the region of Latin America and the Caribbean, SICA, Andean Community and MERCOSUR. The role of domestic and regional savings is rather limited, implying that there are weak regional and domestic channels that can funnel domestic and regional savings into investment in the analysed samples. The importance of regional agreement saving is insignificant and decreases over the analysed period except for the Andean Community. The results indicate low financial integration of the member-countries within the three regional trade agreements.

The study examines the degree of current account deficit (CAD) sustainability and capital mobility for a panel of 97 countries over the period 1980–2020. To this end, the study adopts a novel interpretation of the Feldstein–Horioka coefficient in the context of CAD sustainability and examines the relationship between savings and investment using the Dynamic Common Correlated Effects Mean Group (DCCEMG) estimator. The findings reveal that all country groups exhibit “weakly” sustainable CADs. The estimates of the short-run coefficients reveal that short-run capital mobility is high in all country groups, whereas long-run capital mobility is relatively moderate or low. The rolling-window analysis shows that the 2007–2008 global financial crisis caused a significant drop in both capital mobility and CAD sustainability. In the post-crisis period, short-run capital mobility and CAD sustainability remained on a downward trend in most regions, whereas long-run capital mobility started slowly recovering. By providing a comprehensive regional analysis across six major world regions, this study contributes to the literature by shedding light on the evolving dynamics of international capital flows and regional variations in external balance sustainability.

This study examines the economic determinants of labor mobility within the European Union using data from 23 EU member states over the period 2000–2019. To address both model uncertainty and reverse causality, we employ Bayesian model averaging within a dynamic panel framework with weakly exogenous regressors. We find strong persistence in EU migration flows, largely driven by network effects operating through migrants already present in destination countries. While both earnings and unemployment differentials influence migration, the effect of earnings is 18 to 24 times stronger, suggesting that the search for higher income dominates the motive of escaping unemployment. This finding challenges the notion that labor mobility currently serves as an effective adjustment mechanism in the EU. However, as unemployment differentials tend to widen during recessions and their aftermath, migration may still contribute to economic adjustment when it is most needed. We find no evidence that differences in social benefits, taxation, or human capital significantly affect migration flows, contradicting prior empirical findings and media narratives suggesting the existence of welfare migration. Our results highlight the importance of addressing model uncertainty and endogeneity to accurately assess the drivers of labor mobility in the European context.