Saving, Investment, and Current Account Surplus in Developing Asia
An integral part of global current account imbalances is the large and persistent current account surplus developing Asia has run since the 1997–1998 Asian crisis. A country’s current account surplus is, by definition, equal to its net saving. The central objective of this paper is to investigate the extent to which the saving and investment rate of Asian countries can be explained by the underlying fundamental determinants of saving and investment such as gross domestic product growth and demographic factors. Our empirical analysis yields two key findings. First, we find stronger evidence of oversaving than underinvestment in the region. Second, we find stronger evidence of overinvestment prior to the Asian crisis than underinvestment after the Asian crisis. This suggests that the key to rebalancing Asian growth toward domestic sources lies in promoting consumption rather than investment.
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- Hiro Ito & Menzie Chinn, 2009.
"East Asia and Global Imbalances: Saving, Investment, and Financial Development,"
in: Financial Sector Development in the Pacific Rim, East Asia Seminar on Economics, Volume 18, pages 117-150
National Bureau of Economic Research, Inc.
- Hiro Ito & Menzie Chinn, 2007. "East Asia and Global Imbalances: Saving, Investment, and Financial Development," NBER Working Papers 13364, National Bureau of Economic Research, Inc.
- Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-69, May.
- Kim, Soyoung & Lee, Jong-Wha, 2008. "Demographic changes, saving, and current account: An analysis based on a panel VAR model," Japan and the World Economy, Elsevier, vol. 20(2), pages 236-256, March.
- Barry Bosworth & Gabriel Chodorow-Reich, 2007. "Saving and Demographic Change: The Global Dimension," Working Papers, Center for Retirement Research at Boston College wp2007-02, Center for Retirement Research, revised Feb 2007.
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