The finance-investment-savings-funding circuit in open economies

Abstract

The finance-investment-savings-funding circuit in open economies. On monetary economies the Finance-Investment-Savings-Funding circuit (F-I-S-F) prevails. Investment precedes savings. This circuit was worked out for a closed economy. This study seeks to demonstrate that the circuit F-I-S-F also prevails for open economies. A second point studied in this paper relates the relationship between budget deficits and savings restriction for investment. Conclusions highlight that the circuit F-I-S-F prevails for open economies and that budget deficits do not cause savings restriction for investment. In some situations budget deficits transfer the effects of investment for national savings formation from domestic economy to the rest of the world.