* * * - Of the three perspectives cited here it is savings and investment behaviour that is likely to get top billing in connection with the current imbalances. Europe, with its moderate level of savings, has been somewhat amazed by the lofty savings rates of many Asian countries and the low savings rate of the USA.
When these short-term capital inflows switched into outflows after February 1996, however, a downward adjustment in the rate of growth in overall domestic expenditure, and therefore in the growing demand for imports, became imperative. The divergent rates of expansion in domestic production and expenditure, respectively, were also being financed to an increasing extent with domestic bank credit, or simply the creation of additional money.