The private and public savings gaps in Malta and their impact on the current account

Grech, Aaron George (2000): The private and public savings gaps in Malta and their impact on the current account. Published in: Central Bank of Malta Quarterly Review No. March 2000 (March 2000): pp. 51-61.

Abstract

Any difference that arises between the level of domestic saving and investment is reflected in the nation's current account position. Both domestic saving and investment can be sub-divided into private and public sector components, and gaps between these two variables can be easily computed. This paper analyses the relationship between the private and public saving gaps in Malta during the 1970-1997 period and then proceeds to discern their respective impact on the current account position. In particular, it finds that the deterioration in the current account in the 1990�s was the result of higher government net borrowing, and that there was no statistically significant relationship between the private and public saving gap during the period. Given that in the coming decades economic restructuring and the ageing of the population will probably lead to higher investment and a drop in saving, the article concludes that public finances must be strengthened significantly if a further deterioration in the country�s external imbalance is to be prevented.

• Item Type: MPRA Paper
• Language: English
• Keywords: current account sustainability; fiscal policies and the behaviour of economic agents; saving and investment trends
• Subjects: H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents

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