Jump to content

Saving-investment balance

From Wikipedia, the free encyclopedia

In economics, saving-investment balance or I-S balance is a balance of national savings and national investment, which is equal to current account. This relationship is obtained from the national income identity.

Description

[edit]

This is the national income identity:[1]

where

The national income identity can be rewritten as following:[2]

where T is defined as tax. (Y-T-C) is savings of private sector 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.[2][3][4]

See also

[edit]

References

[edit]
  1. ^ Christiano, 2003, Rough Notes on National Income Accounting and the Balance of Payments, Northwestern University, p.1.
  2. ^ a b Christiano, 2003, Rough Notes on National Income Accounting and the Balance of Payments, Northwestern University, p.3.
  3. ^ IMF publishment, 2006, Do Current Account Deficits Matter?, accessed 3 February 2015.
  4. ^ Tejvan Pettinger, 2012, Current Account = Savings – Investment, EconomicsHelp.org, accessed 3 February 2015.