of course

in theory

interest rate is negatively correlated with investment

when interest rate is high, saving is high, investment is low

when interest rate is low, saving will be low, but investment will be high

Theoretically, it's true that high saving rate may lead to high investment. It's because there are more money in the society to lend out to those investor who can use the money in a better way to make a better return.

But this may not hold when you take into account of a lot of other variables: including interest rate, economy structure, exchange rate policy, labour market and so on.

For example: in US, if i'm not wrong, they have a negative saving rate, but they still maintain good economic growth in the last years. For Japan, the interest rate is almost zero, but due to the structural problem (bureacratic organization structure, karatsu structure, scandal of bank's bad debt, etc), labour market problem (high labour cost), non-stable exchange rate policy, political instability, heavy local protectionism, etc, investors just don't have any confidence to proceed for any investment in Japan.

The last thing is: even the zero interest rate sounds attractive, but it also implies the rate will only have a chance to increase. For investors, when they are facing uncertainy, and possible increase in cost of capital, they would better to put the money in elsewhere instead of in Japan.

Hope this help!

cheers upstairs~

i'm trying to write an essay on this topic , and the main barrier at the moment is i just cannot interprete the relationship among saving, investment, productivity and economic growth in a logial and theoretical way.

as we all know, increasing savings is the fundation of expanding investment, while investment grow up, then the productivity also rises followed by the GDP growth.however, just like you said above, this can be affected by several variables. for instance, as the high living cost in japan, people do save their extra money after paying all the necessary expenses. but the economy growth in Japna is quite slow though.

now, i need other examples to support the statement which means they are in favour of high saving will leads high economy growth...

wanna somebody's help~~~

[此贴子已经被作者于2006-5-1 15:14:29编辑过]