The crisis and the global demand, from the short to medium term

Abstract

Thinking about the global macroeconomy in the medium term, global consumption would tend to fall due to the increase in the savings rate in the United States as a consequence of the crisis. At the same time, it is difficult to imagine that investment will increase if consumption does not recover first. In this context, how will the fall in consumption be compensated when the recent increase in public deficits must be reversed to ensure fiscal sustainability? The solution may come from an increase in consumption in the rest of the world, particularly in developing countries, and from a change in the composition of demand associated with improved consumption in countries that stimulates investment. Thus, those countries that invest in restructuring their economies will emerge from the transition with a greater stock of capital per capita and, therefore, with a higher per capita income.

JEL classification: F42 ; F44 ; G01