Domestic Determinants of the Current Account Balance of the United States

The U. S. economy is found to be sufficiently open to make the balance on foreign transactions an essential part of the equilibration process between saving and investment. Specifically, over the past two decades, changes in the national saving rate have increasingly been matched by changes in net foreign rather than domestic investment. Thus, it would be counterfactual to assume in policy discussions that measures to raise the national saving rate add fully to the stock of productive capital in the United States, barring only Keynesian complications. Conversely, a stimulus to domestic investment could be validated in part by drawing on foreign saving.