The global saving glut hypothesis theorizes that the drop in long-term real interest rates to excess saving outside the United States is reflected in surpluses in the U.S surpluses. However, some experts agree that it is incorrect to associate the global saving glut exclusively with China. First, the saving countries were developed in Asia, such as Japan and South Korea, and then due to fluctuations in oil, countries in the Middle East and North Africa. Afterward, China became one of the highest sources of saving glut source countries, although it had an equal impact as the other countries.

Conclusion

The global saving glut hypothesis explains the lower interest rates and the associated effects on asset prices and financial stability as Bernanke (and his co-authors) in various speeches and research papers (Barsky and Easton 2021). The global savings glut showed increased savings from East Asia and the Middle East, North Africa, and the scarcity of investment demand worldwide. And this directly lowered interest rates in the 2000s.

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