The ratio of net investment to deficit' essential to reinforce the 3 % ‘golden rule'

Under the price-equilibrium as historically shown in the literature, the balance between total macro demand and supply is adjusted through the market principle by factor/market.  Actual data shows the situation ‘soon after’ the above price adjustments (not ‘just before’).  It is difficult for policy-makers to adjust all the price levels to satisfy the whole system.  The financial assets are another side of the real assets at “a system of national accounts” (the SNA 1993) by country.  This is true when actual data are used as in statistics.  Yet, endogenously as the whole system, the real assets are independent of the financial assets that are managed by the market principle, with the work of the central banks and financial institutions.  A universe fact is that all the causes and results occur simultaneously and are endogenously clarified by the real assets.  If this fact is measured, then financial and market policies could positively take advantage of the fact and, financial and market policies are robustly strengthened and never repeat bubbles, getting rid of counter-measures as the second mover.

The author realizes the above fact at the Endogenous Kamiryo World Table (KEWT) 6.12 data-sets for 81 countries, 1990-2010; starting with 25 original actual data of International Financial Statistics Yearbooks, IMF; and integrating the endogenous model (theory) and system (practice) into a unity of theory and practice.  This paper focuses the ‘the ratio of net investment to deficit,’ keeping in mind’ the 3 % to GDP in the Stability Pact and the Golden Rule (or, by the European Commission, 1997 and 2010).

Subjective financial and market policies are traced back to a fact that wages are attributed to households and, returns to enterprises and corporations.  This shows a defect that government produces no returns even if deficit becomes huge.  Yet, the SNA has a proper function of actual records to national accounts.  The endogenous system thoroughly converts records-oriented to policies-oriented goal.

The ratio of net investment to deficit shows the essence of the endogenous structure of the balance of payments, deficit, and the saving less net investment at the private sector.  This ratio is another expression of net investment to the difference between saving and net investment, each at the private sector.  The rate of technological progress is most basic and measured endogenously as the product of net investment and the qualitative net investment coefficient, 1−beta, where beta moves slowly but, net investment changes sharply by year.  Thus, net investment by sector (government and private) is one of fundamental elements at the endogenous-equilibrium, which is a whole surrogate for the price-equilibrium.  The endogenous-equilibrium holds most influenced by net investment by sector.  As a result, all the endogenous parameters and variables are simultaneously measured by sector.  The endogenous and actual ratios of net investment to deficit become a key for solving problems and leading to sustainable returns and growth.  This paper shows related figures by country for 46 countries, each as a hopeful lighthouse to the route/goal.