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Emergence of Asia: Reforms, Corporate Savings, and Global Imbalances

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  • Jingting Fan
  • Şebnem Kalemli-Özcan

Abstract

One of the explanations for global imbalances is the self-financing behavior of credit-constrained firms in rapidly growing emerging markets. The paper uses an extensive firm-level data set from several Asian countries during 2002–11, and tests the micro foundation of this theory by estimating the effect of an exogenous change in credit constraints, resulting from financial reforms, on firms’ saving behavior. As predicted, after financial reforms, firms who were credit constrained previously decreased their savings more (or increased their savings less) relative to unconstrained firms. However, this firm-level effect did not lead to a decrease in aggregate corporate savings as conjectured by the theory. The sector-level regressions show that corporate savings increased after financial reforms, and more so for sectors more dependent on external finance. The current account surpluses also did not register a significant deterioration after financial reforms, consistent with the paper’s findings on sectoral and aggregate corporate savings.

Suggested Citation

  • Jingting Fan & Şebnem Kalemli-Özcan, 2016. "Emergence of Asia: Reforms, Corporate Savings, and Global Imbalances," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(2), pages 239-267, June.
    • Handle: RePEc:pal:imfecr:v:64:y:2016:i:2:p:239-267
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    Cited by:

    1. Bomprezzi, Pietro & Marchesi, Silvia, 2023. "A firm level approach on the effects of IMF programs," Journal of International Money and Finance, Elsevier, vol. 132(C).
    2. Jan Behringer, 2019. "Factor shares and the rise in corporate net lending," IMK Working Paper 202-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Allen, Cían, 2019. "Revisiting external imbalances: Insights from sectoral accounts," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 67-101.
    4. Ponomarenko, Alexey A. & Ponomarenko, Alexey N., 2018. "What do aggregate saving rates (not) show?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-20.
    5. Jan Behringer, 2019. "Factor shares and the rise in corporate net lending," IMK Working Paper 202-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Han, Xuehui & Epetia, Ma. Christina F. & Cheng, Yuan, 2021. "“Subsidies” or “taxes”? Corporate credit misallocation induced by the nexus of state-owned enterprises and state-owned banks," Journal of Asian Economics, Elsevier, vol. 76(C).
    7. Mai Dao & Chiara Maggi, 2018. "The Rise in Corporate Saving and Cash Holding in Advanced Economies: Aggregate and Firm Level Trends," IMF Working Papers 2018/262, International Monetary Fund.

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