In: Finance
During a pandemic, private sector financial behaviour becomes more risk-averse would like to move into surplus. Suppose that the foreign sector also runs a surplus. What does this imply for the government financial balance? Under what circumstances is it possible for a country to run a government surplus and a domestic private sector surplus at the same time?
\
The government fiscal balance is one of three major financial sectoral balances in the national economy, the others being the foreign financial sector and the private financial sector. The sum of the surpluses or deficits across these three sectors must be zero by definition. A surplus balance represents a net savings or net financial asset building position (i.e., more money is flowing into the sector than is flowing out), while a deficit balance represents a net borrowing or net financial asset reducing position (i.e., more money is flowing out of the sector than is flowing into it). Each sector may be defined as follows, using the U.S. as an example: