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 This is the national income identity:Christiano, 2003, Rough Notes on National Income Accounting and the Balance of Payments, Northwestern University, p.1.
where Y: GDP, C: national consumption, I: national investment, G: government spending, EX: export, IM: import, EX－IM: current account.
The national income identity can be rewritten as following:Christiano, 2003, Rough Notes on National Income Accounting and the Balance of Payments, Northwestern University, p.3.
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.IMF publishment, 2006, Do Current Account Deficits Matter?, accessed 3 February 2015.Tejvan Pettinger, 2012, Current Account = Savings – Investment, EconomicsHelp.org, accessed 3 February 2015.
See also Global imbalances Global saving glut
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