In the perfect world envisioned by economists, a country’s investments should not depend on its savings. After all, countries should be able to borrow as much as they need from international financial markets if their investment opportunities are good, and their own domestic savings should be irrelevant. So there should be a low correlation between a country’s investment and its savings. In a seminal paper in 1980, Martin Feldstein from Harvard University and Charles Horioka from Osaka University showed that this assumption was incorrect: there was a much higher positive correlation between a
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