Focus on distortions - Blanchard

In his Mundell-Fleming Lecture, MIT economist Oliver Blanchard suggests that the outcome of potential government intervention to address current global imbalances is uncertain.

Blanchard presents a model whereby high savings rates in China and low savings in the US are caused by a series of market distortions.

In China high savings are a result of weak financial intermediation and uncertainty about retirement and health care provisions. In the US, low savings is a result of "public dissaving"

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