In
economics
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analy ...
, saving-investment balance or I-S balance is a balance of
national savings
In economics, a country's national saving is the sum of private and public saving. It equals a nation's income minus consumption and the government spending.
Economic model
Closed economy with public deficit or surplus possible
In this ...
and national investment, which is equal to
current account. This relationship is obtained from the national income identity.
Description
This is the national income identity:
:
where
*Y:
GDP,
*C: national
consumption,
*I: national investment,
*G:
government spending
Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual ...
,
*EX:
export
An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
,
*IM:
import,
*EX－IM: current account.
The national income identity can be rewritten as following:
[Christiano, 2003]
Rough Notes on National Income Accounting and the Balance of Payments
Northwestern University, p.3.
:
where T is defined as
tax. (Y-T-C) is savings of
private sector
The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned by private groups, usually as a means of establishment for profit or non profit, rather than being owned by the government.
Employment
The ...
and (T-G) is savings of government. Here, we define S as National savings (= savings of private sector + savings of government) and rewrite the identity as following:
:
This identity implies that the difference of national savings and national investment is equal to current account.
[Tejvan Pettinger, 2012]
Current Account = Savings – Investment
EconomicsHelp.org, accessed 3 February 2015.
See also
*
Global imbalances Global imbalances refers to the situation where some countries have more assets than the other countries. In theory, when the current account is in balance, it has a zero value: inflows and outflows of capital will be cancelled by each other. Hence ...
*
Global saving glut
References
{{reflist
International finance