Long term patterns of European accumulation and growth: Europe at a turning point

The current transitional paths of the Euro Area countries can be seen as a turning point between two alternative scenarios: i) a low decline path (although no secular stagnation), where markets saturation features and trends dynamically interact with a growing share of finance disentangled from the real economy; ii) an evolution towards self-sustained growth trajectories bundles, where feasible economic and institutional improvements are set in place. In order to capture such a turning point, we adopt a new approach to understand the Saving-Investment Feldstein – Horioka puzzle, developing a model based on the investigation on the time-growth varying surfaces of the Average Propensity to Save (APS) and the Average Propensity to Invest (API). The related specification econometrics, a sort of Colander “Craftsmen’s approach” that includes à la MIMIC estimates of the real rate of depreciation of social overhead capital stock, requires only the hypotheses of adaptive behaviour and stock-flow feedback loops. The results are consistent with the current instability of the Euro Area and show (and measure) to what extent small institutional changes and a limited set of operators can shift the overall trajectories of the EU system.