Abstract
The reduced supply of and an increasing demand for world savings suggest continuously high interest rates in the years to come. The IMF, OECD and BIS recently expressed their concern about the sustainability of the external deficits in view of the persistent large US external deficit, the substantial German external deficit caused by the unification, the increased demand for savings to finance the restructuring of the Eastern European economies and the environmental policies. This question seems relevant, especially to the US. For, total claims to the limited US savings as represented by the combined financing needs of private domestic investment and the federal budget deficit, points to an awkward situation. The persistence of this’ savings gap’ (Corrigan, 1990), accompanied with a growing budget deficit creates a serious twin-deficit-twin-debt problem (Kremers, 1990).
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de Groof, R., van Tuijl, M. (1994). The twin-debt problem in an interdependent world. In: Scobie, H.M. (eds) The European Single Market. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-1304-5_10
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DOI: https://doi.org/10.1007/978-94-011-1304-5_10
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