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Private Saving In India And Malaysia Compared: The Role Of Financial Liberalization And Expected Pension Benefits

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Author Info
James Ang
Kunal Sen

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Abstract

In this paper, we provide a comparative account of the evolution of private saving in India and Malaysia, and analyze how policy changes in the financial sectors and pension systems help explain differences in their saving performance. Using the ARDL bounds estimation procedure, we find a fairly robust long-run relationship between private saving and its determinants in both countries. Consistent with the predictions made in the life cycle model, our results indicate that higher income growth stimulates private saving and an increase in age dependency retards private saving. The results provide some support for the hypothesis that financial liberalization results in lower private saving in both countries. The evidence also indicates that expected pension benefits tend to stimulate private saving in India, but that the reverse is found in Malaysia.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2008/1308privatesavingangsen.pdf
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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 13/08.

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Length: 20 pages
Date of creation: 01 Jun 2008
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Handle: RePEc:mos:moswps:2008-13

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Related research
Keywords: private savings; pension saving; financial liberalization; India; Malaysia.;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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References listed on IDEAS
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  1. Panicos O. Demetriades & Kul B. Luintel, 1997. "The Direct Costs Of Financial Repression: Evidence From India," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 311-320, May. [Downloadable!] (restricted)
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  2. Bayoumi, Tamim, 1993. "Financial Deregulation and Household Saving," Economic Journal, Royal Economic Society, vol. 103(421), pages 1432-43, November. [Downloadable!] (restricted)
    Other versions:
  3. Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," MPRA Paper 6978, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Hermes, Niels & Lensink, Robert, 2005. "Does Financial Liberalization Influence Saving, Investment and Economic Growth? Evidence from 25 Emerging Market Economies, 1973-96," Working Papers RP2005/69, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326. [Downloadable!]
  6. Hélène Poirson, 2007. "Financial Market Implications of India's Pension Reform," IMF Working Papers 07/85, International Monetary Fund. [Downloadable!]
  7. Anuradha Dayal-Gulati & Christian Thimann, 1997. "Saving in Southeast Asia and Latin America Compared - Searching for Policy Lessons," IMF Working Papers 97/110, International Monetary Fund.
  8. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October. [Downloadable!] (restricted)
  9. Robert Gillingham & Daniel Kanda, 2001. "Pension Reform in India," IMF Working Papers 01/125, International Monetary Fund. [Downloadable!]
  10. Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 84(1), pages 215-233, September. [Downloadable!] (restricted)
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  11. Oriana Bandiera & Gerard Caprio & Patrick Honohan & Fabio Schiantarelli, 2000. "Does Financial Reform Raise or Reduce Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 239-263, May. [Downloadable!] (restricted)
    Other versions:
  12. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July. [Downloadable!] (restricted)
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  13. James B. Ang, 2008. "Finance And Inequality: The Case Of India," CAMA Working Papers 2008-18, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
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  14. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct. [Downloadable!] (restricted)
  15. Pentecost, Eric J & Moore, Tomoe, 2006. "Financial Liberalization in India and a New Test of the Complementarity Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 487-502, January.
  16. Philippe Aghion & Diego Comin & Peter Howitt, 2006. "When Does Domestic Saving Matter for Economic Growth?," NBER Working Papers 12275, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February. [Downloadable!] (restricted)
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