Saving and Investment in a Global Economy

Overview

The emergence of large trade imbalances among the industrial countries during the 1980s - particularly the massive deficit of the United States and the surpluses of Germany and Japan - has led to growing disenchantment with the international economic system. But while many critics point to unfair trade practices as the cause of these imbalances, others contend that this emphasis is misplaced. In this provocative book by one of the nation's leading economists, Barry Bosworth argues that trade disparities are not ...
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Overview

The emergence of large trade imbalances among the industrial countries during the 1980s - particularly the massive deficit of the United States and the surpluses of Germany and Japan - has led to growing disenchantment with the international economic system. But while many critics point to unfair trade practices as the cause of these imbalances, others contend that this emphasis is misplaced. In this provocative book by one of the nation's leading economists, Barry Bosworth argues that trade disparities are not the result of external infractions, but rather a reflection of domestic failures. He shows that the United States, for example, with its large government budget deficit and low rate of private saving, must borrow abroad to finance its investment. Similarly, trade surpluses of countries such as Japan reflect a surplus of national saving over domestic investment, rather than restrictive trade practices. Bosworth explains that large trade imbalances became possible in the 1980s because of the development of an international capital market that greatly reduced the barriers to borrowing and lending across national borders. The result is an international system in which national economies are closely linked through international capital markets as well as through trade in goods and services. Using data from the major industrial countries, Bosworth highlights the process by which changes in domestic rates of saving and investment lead to changes in interest rates, exchange rates, and trade balances. He first examines why national saving and investment have fallen throughout the industrialized world. He then focuses on the determinants of exchange rates and trade flows, and considers whether the wide fluctuations in exchange rates are a cause for concern or simply an integral part of the international adjustment to the divergent patterns of national saving and investment.
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Editorial Reviews

Booknews
Bosworth (economics, Brookings Institute) says that the cause of international trade imbalances is not deficient regulation or lack of compliance, but US domestic failure. He reasons that, because Americans save so little compared with people elsewhere, when the government wants to borrow money, it must go overseas for it. The borrowing frenzy of the Reagan and Bush years, therefore, has left us not only with an enormous national debt, but one owed primarily to foreigners. Paper edition (unseen), $10.95. Annotation c. Book News, Inc., Portland, OR (booknews.com)
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Product Details

  • ISBN-13: 9780815710431
  • Publisher: Brookings Institution Press
  • Publication date: 7/1/1992
  • Pages: 188
  • Lexile: 1540L (what's this?)
  • Product dimensions: 6.04 (w) x 9.03 (h) x 0.58 (d)

Table of Contents

Ch. 1 Introduction 1
Changing Views of the Global Economy 4
Sources of Controversy 13
Policy Implications 19
Ch. 2 An Analytical Framework 30
Alternative Measures of the Current Account 30
The Mundell-Fleming Model 37
Major Issues 45
Ch. 3 International Trends in Saving and Investment 53
Basic Trends in Saving and Investment 55
Alternative Explanations of Private Saving 62
Investment Trends 80
The Private Saving-Investment Balance 92
Taxes and Inflation 95
Net Saving of the Public Sector 97
Ch. 4 Exchange Rate Mechanics: Some Empirical Tests 107
Alternative Theories of Exchange Rate Determination 109
Empirical Analysis 119
Ch. 5 Income and Price Elasticities in International Trade 140
Historical Trends 147
Exports 150
Imports 159
Divergent Income Elasticities: A Digression 164
Nonenergy Trade Balances 165
References 177
Index 183
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