Write a research project discussing a topic on Savings Glut in Small Open Economies and Economic Growth
The paper should follow the basic structure:
I. The paper should start with a short introduction/motivation section. Why should anyone care about your topic? Here talk about specifics, current events, politics, etc. (~1 pg). Be sure to establish a clear thesis (argument/focus) and lay out preliminary support you will reference throughout the next section.
- Use sources from reputable publications here (NY Times, Wall Street Journal, Economist, etc)
II. Next, you are expected to review the major contributions on the topic and the current state of the literature, citing at minimum five sources scholarly sources. This should be the bulk of your paper (~3-4 pgs). It is a literature review of your topic. If you have a specific topic (e.g. a specific trade deal, etc) then be sure to generalize your topic for this section. So if you were discussing NAFTA or Brexit, you would want to discuss recent literature on free trade agreements/areas for the literature review. Here you want to discuss general theories on your topic so that you can establish the necessary economic relationships.
- Use scholarly sources here (Journal Articles, Federal Reserve, IMF or NBER Studies, etc)
III. Extension. You just reviewed the literature on a specific subject. Here you should suggest an extension to the current literature (~.5 pgs). What is missing from the literature you reviewed (could be a new data set, case study, research methodology)?
IV. Conclusion. Wrap it up. Tie together the support presented above to call back to main thesis (~ .5 pg).
V. Reference Section that links to in-text citations. Use any citation format you choose (APA, MLA, etc), just be consistent throughout the paper. If you choose to, you can simply footnote within the text and forego this section.
Introduction
A savings glut is a situation in which a country or region saves more than it invests. This can lead to a number of economic consequences, including low interest rates, appreciation of the exchange rate, and a decline in economic growth.
Small open economies are particularly vulnerable to the effects of a
savings glut. This is because they are more reliant on trade and foreign investment than larger economies. When there is a global savings glut, these economies may experience a decline in exports and a slowdown in economic growth.
Literature Review
The literature on
savings gluts and economic growth is extensive. Some of the key findings of this literature include:
- Savings gluts can lead to low interest rates.
- Low interest rates can lead to an appreciation of the exchange rate.
- An appreciation of the exchange rate can lead to a decline in exports.
- A decline in exports can lead to a slowdown in economic growth.
There are a number of theories that attempt to explain the relationship between savings gluts and economic growth. One theory is that savings gluts lead to a decline in investment. This is because when there is a surplus of savings, investors have less incentive to invest. Another theory is that savings gluts lead to a decline in consumption. This is because when people save more, they have less money to spend on consumption.
Extension
One extension to the current literature on savings gluts and economic growth is to examine the role of government policy. Governments can play a role in mitigating the negative effects of a savings glut by stimulating investment and consumption. For example, governments can provide tax breaks for investment or increase government spending.
Another extension to the current literature is to examine the impact of
savings gluts on different types of small open economies. For example, it is possible that the effects of a savings glut will be more pronounced in economies that are heavily reliant on exports of commodities.
Conclusion
The literature on
savings gluts and economic growth suggests that these phenomena can have a significant impact on small open economies. Governments in these economies should be aware of the potential risks associated with savings gluts and take steps to mitigate these risks.
References
- Bernanke, B. S. (2005). The global saving glut and the U.S. current account deficit. The Federal Reserve Board.
- Chinn, M. D., & Prasad, E. S. (2003). Saving gluts and global imbalances. NBER Working Paper No. 9881.
- Obstfeld, M., & Rogoff, K. (2005). Global imbalances and the financial crisis: Products of common forces? The Federal Reserve Bank of New York.
- Taylor, A. M. (2004). The rise of China and the future of the world economy. The National Bureau of Economic Research.