Could someone please explain why S_I leads to depreciation) using the savings-investment imbalance formula : S-I=(X-M)???_
When savings is less, there is less capital available which is needed for growth. Since the country needs capital which is having deficiency gap, it can be satisfied by by out of country investments. When foreign investors invest, they need to buy the currency. Hence, when S < I, currency appreciates.
I was looking at it logically. I missed the formula part…so still an open ended question.
Y= C+I+G+(X-M)
&
Y= C+S+T
Shuffle, shake it up, shake it up, shuffle, bang, you’ve got S-I=X-M
As a NewYorkian would say after bumping into you and spilling hot coffee on you: 'Dont worry about it"