Is Global Economic Stability or Instability Still Possible

Abstract

In the era of globalization, the export-import of savings and investments has also been globalized. The saving-investment gap or excess saving over investment has a dual role in creating internal and external economic instability. While, for example, positive excess saving over investment creates an internal economic recession, on the other hand, it creates favorable balance of current account. Paradox of thrift (or the effects of excess savings over investment) is equally applicable to both the national economy and global economy. Owing to saving-investment inequality both at the national and global level, the achievement of the optimal level of internal and/or external economic status of all the countries is not possible simultaneously in the globalized world.