Budget Deficits, Trade Deficits and Global Capital Flows: The National Savings Identity
In this cornerstone chapter, the vitally important National Savings Identity (NSI), linking trade and budget balances to global capital flows, interest rates, and exchange rates, makes its first appearance. In many ways, this chapter, linking the “twin deficits” in a fundamentally intuitive manner, sets the tone for macroeconomic policies to be discussed in following chapters.
KeywordsInterest Rate Current Account Budget Deficit Capital Inflow Government Debt
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