saving on a regional level attempts to discover whether some regions are isolated from the capital market centers and hence must place greater reliance on generating their own sources of finance.
The paper concentrates on the saving-investmentrelationship across regions rather than through time 3/ and therefore analyzes each relationship net of business cycle effects. Surprisingly, the relationship between total saving and investment is significantly negative in Great Britain and in Canada. 4/ By separating the private and government components of both variables
Hong Kong, like other city financial centers, has a high private saving rate. This paper seeks to understand what the principal drivers of saving and investment in financial centers are. Cyclical frequency changes affecting international financial and trade linkages are key drivers of saving and investment fluctuations in Hong Kong. Hong Kong has a long-established track-record as Asia’s premier center for cross-border financial transactions. Its preeminence derives from its special link with Mainland China, with respect to foreign direct investment flows.
Global current account balances—the overall size of current account deficits and surpluses—continued to widen in 2021 to 3.5 percent of world GDP, and are expected to widen again this year. The IMF’s multilateral approach suggests that global excess balances narrowed to 0.9 percent of world GDP in 2021 compared with 1.2 percent of world GDP in 2020. The pandemic has continued to affect economies’ current account balances unevenly through the travel and transportation sectors as well as a shift from services to goods consumption. Commodity prices recovered from the COVID-19 shock and started rising in 2021 with opposite effects on the external position of exporters and importers, a trend that the war in Ukraine is exacerbating in 2022. The medium-term outlook for global current account balances is a gradual narrowing as the impact of the pandemic fades away, commodity prices normalize, and fiscal consolidation in current account deficit economies progresses. However, this outlook is highly uncertain and subject to several risks. Policies to promote external rebalancing differ with positions and needs of individual economies.
Front Matter Page Research Department
II. The Growth of the Public Debt and the Decline in Aggregate Savings in the United States versus Historical and International Benchmarks
The growth of the public debt in the United States: historical features
The growth of the public debt in the United States: international comparison
The decline in aggregate savings in the United States: historical evidence and international comparison
III. The Historical Correlation in the Saving-InvestmentRelationship
The relationship between regional saving and investment is examined to measure the extent of capital mobility. The relationship between total regional saving and investment is significantly negative in Canada and the United Kingdom, in contrast to the significant positive relationship found across countries. The difference is attributed to government subsidies to poor regions. The relationship between personal saving and private investment is insignificant in the U.K. and Germany and is negative in Canada which suggests that capital is mobile for individuals. The relationship between retained earnings and private investment is significantly positive in the U.K. and Canada suggesting capital immobility for firms but a test for the presence of regional corporate liquidity constraints yields no effects.
The macroeconomic data discussed in Section II suggest that saving, investment, and growth rates are positively linked in the developing countries. This section examines in more detail the relationship among these variables, starting with the relationship between saving and investment. It then considers the evidence on the effects of saving and investment on growth and ends with a brief discussion of the direction of causation among these variables.
As discussed in Section IV of Part Two , if capital were perfectly
years ago have become substantial net users, but the durability of the current pattern remains highly questionable.
The sudden emergence of the United States as a deficit country on a major scale casts doubt on whether the industrial world as a whole will resume its traditional-role as a large-scale source of finance to developing countries. Unless or until U.S. national saving/investmentrelationships can be adjusted in a way that permits a higher proportion of domestic capital investment to be financed from domestic sources, the prospects for expansion of net
5. An extensive literature has studied the determinants of saving and investment. Many of these studies estimate saving-investmentrelationships which depend on factors highlighted in intertemporal optimizing models. Underpinning savings are income, interest rates, factors that drive precautionary savings (income volatility and access to insurance and credit markets), and life-cycle savings ahead of retirement. Underpinning investment include measures of income and prospective growth, uncertainty and volatility, and factors that capture the cost of funds. The
John R. Karlik, Mr. Michael W. Bell, M. Martin, S. Rajcoomar, and Charles Adair Sisson
the targeted real growth rate compounded by CPI inflation. Capital expenditures and net lending increase by nominal GDP. In proportion to GDP, changes are small and no reallocation decisions are evident. Over 1986–90, financing from the banking system to the central government averaged 1.4 percent of GDP; this relationship is maintained in the illustrative projection. As with the balance of payments, users should replace this neutral example with their own projection of government operations.
The saving-investmentrelationship that emerges from these sectoral
The increase in the U.S. public debt over the past twelve years raises questions about its implications for investment and economic growth. This paper places these developments within an international and historical context and quantitatively examines the implications of various measures of the current U.S. public debt-to-GDP ratio on economic growth. The analysis is undertaken through extensions of recently developed endogenous growth models. The results suggest that while higher levels of the public debt may affect long-run economic growth negatively, the order of magnitude is not large enough to be a cause for serious concern.