Analysis Of Ben Bernanke 's Global Saving Glut ' View Of Global Imbalances

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Introduction This essay will discuss the Ben Bernanke’s “global saving glut” view of global imbalances, the causes related to it, the possible policies applicable and its extent of reliability in comparison to other views, such as the Borio and Disyatat’s “excess elasticity” one.
To well address this concept, the current account and concepts related to it will be explained with the big deficits and surpluses issues that have arisen since 1990s.
Then Bernanke’s thoughts and the extent to which his view can be connected to the economic crisis will be presented using both economic theory and other economists’ ideas.

The current account and the “global saving glut”
The current account is one of the components of the Balance of Payment together with the capital and financial account and the reserve assets account. This represents the difference between a country’s savings and its investment and it is defined as the sum of the payments of goods and services bought from foreigners, net income from abroad and net current transfers. When the current account is in deficit, it means that the country’s net sales abroad value is negative, while it is in surplus when this value is positive. The current account must balance, so surplus of one nation means deficits of another.
There are different approaches to determine the current account. In this essay it is worth to explain the “saving-investment balance approach” since Bernanke’s “saving glut” idea is based on it. The identity for

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