says that savings deficit will require high interest rates and/or strong economic growth to attract foreign capital. What happens when country has a Savings Surplus?
Think Supply and Demand of capital. If there is not alot of cash it’s a similar situation to limited money in the economy, this will cause higher interest rates. With surplus there will be lower interest rates, as more cash is dumped into the economy to be put into investment vehicles, the savers/investors will accept a lower interest rate. Imagine a situation where there is one country with very rich opportunities but high barriers for capital to cross and a country with lower barrier, this country would attract more captial, but every dollar invested will earn lower returns and be worth less and interest rates would be lower with a saving surplus.