Does Developing Asia Save More? Evidence from a Panel of High Saving Nations in Asia

Abstract

The high saving of developing Asian economies has attracted attention of the researchers and policy makers alike. While various country-specific papers have investigated this issue, the present paper looks into this subject in a panel setting discerning the common variables influencing the saving behaviour in developing Asian economies. In particular, the saving behavior of six high saving countries in developing Asia, viz., China, India, Indonesia, Malaysia, the Philippines and Thailand, have been probed in a panel-data framework over the period 1990 through 2007. Specifically, two questions are examined: (a) Does developing Asia save more? and (b) What are the determinants of Asian savings? In the present study, answer to the first question emerges as affirmative from the stylized facts. Furthermore, factors such as high growth, low age-dependency, increasing degree of financial deepening, presence of liquidity constraint, remittances, terms of trade shock and human capital formation emerge as key determinants of savings from the econometric analysis of this panel of six countries. Thus, it seems that the high savings of developing Asian nations can be explained in terms of these standard variables. This has important implications for the way ahead and policy options for resolving global imbalances.