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The Post-Asian Crisis Drop In Investment: The Cases Of Indonesia, Korea, Malaysia, And Thailand

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  • TAI-KUANG HO
  • KUO-CHUN YEH

Abstract

type="main" xml:lang="en"> This study analyzes drops in East Asian investment and their determinants after the 1997–1998 Asian financial crisis. We first employ a random level-shift autoregressive model to quantify the shift in investment ratios of four Asian economies hit by the 1997–1998 Asian financial crisis: Indonesia, Korea, Malaysia, and Thailand. We trace the major historical shifts in the levels of investment ratios and we find that the cumulated downward shifts in investment ratios during 1997–1998 for Indonesia, Korea, Malaysia, and Thailand are 6, 5, 14, and 14 percentage points, respectively. The investment ratios of most countries experienced several rebounds between 1999 and 2001, but the rebounds were too small to bring investment ratios back to their pre-1990 levels. Having identified the episodes of investment shifts, the Bayesian Model Averaging (BMA) and several robust tests are employed to investigate the determinants of those level shifts in investment ratios. We find that real per capita gross domestic product growth and banking crises are the two most important factors contributing to shifts in the investment levels of these four crisis-hit Asian economies. The results are useful in understanding the causes and remedies of global imbalances. (JEL C11, E22, F32, O53)

Suggested Citation

  • Tai-Kuang Ho & Kuo-Chun Yeh, 2014. "The Post-Asian Crisis Drop In Investment: The Cases Of Indonesia, Korea, Malaysia, And Thailand," Contemporary Economic Policy, Western Economic Association International, vol. 32(3), pages 618-638, July.
    • Handle: RePEc:bla:coecpo:v:32:y:2014:i:3:p:618-638
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    2. Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.

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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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