Which of the following is a characteristic of the 'Global Savings Glut' hypothesis?
A. A global shortage of saving
B. Capital flows were irrelevant
C. A surplus of global saving relative to investment contributed to low interest rates and capital flows into deficit countries
D. Only domestic factors determined interest rates
Answer: Option C
Solution (By JKSSB Mock Tests)
The global-savings-glut hypothesis, advanced by Ben Bernanke, attributes the low long-term interest rates and large current-account deficits of some countries in the 2000s partly to excess saving in emerging Asia and oil-exporting economies.
Explanation:
Third-generation crisis models highlight the role of financial-sector fragility, foreign-currency debt, and balance-sheet effects in amplifying currency and banking crises.
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