Global Imbalances And Household Savings: The Role Of Wealth

Many claim that fluctuations in US private savings help to create and to sustain global imbalances because of their influence on the current account deficit. To test this claim, this paper investigates the determinants of aggregate household savings using a panel of 18 developed countries for the period 1980-2005. The authors weave two strands of literature: the first strand from consumer theory, considering specifically the 'Wealth effect', the second strand from aggregate private savings theory.