economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and intera ...

, saving-investment balance or I-S balance is a balance of

national savings In economics, a country's national saving is the sum of private and public saving. It equals a nation's income minus consumption and the government spending. Economic model Closed economy with public deficit or surplus possible In this ...

and national investment, which is equal to

current account Current account or Current Account may refer to: * Current account (balance of payments), a country's balance of trade, net of factor income and cash transfers * Current account (banking) A transaction account, also called a checking account, ch ...

. This relationship is obtained from the national income identity.

Description

This is the national income identity: :

Y=C+I+G+(EX-IM)

where *Y:

GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...

, *C: national

consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...

, *I: national investment, *G:

government spending Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual o ...

, *EX:

export An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...

, *IM:

import An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...

, *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. :

(Y-T-C)+(T-G)-I=EX-IM

where T is defined as

tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

. (Y-T-C) is savings of

private sector The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned by private groups, usually as a means of establishment for profit or non profit, rather than being owned by the government. Employment The ...

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: :

S-I=EX-IM

This identity implies that the difference of national savings and national investment is equal to current account.Tejvan Pettinger, 2012
Current Account = Savings – Investment
EconomicsHelp.org, accessed 3 February 2015.

References

{{reflist International finance

Description

See also

References