Asia Rising

Asia Rising

Growth and Resilience in an Uncertain Global Economy

Edited by Hal Hill and Maria Socorro Gochoco-Bautista

The centre of global economic activity is shifting rapidly towards Asia, driven by a combination of the economic dynamism of China, India and other middle-income Asian countries, and sluggish growth in the OECD economies. The rapid growth and rising global prominence has raised a range of major challenges for Asia and for the rest of the world. This comprehensive, forward-looking book examines these issues through in-depth studies of major Asian economies and an analysis of the key development policy options.

Chapter 5: Savings and investment

Charles Yuji Horioka and Akiko Terada- Hagiwara

Subjects: asian studies, asian development, development studies, asian development

Extract

Developing Asia has been characterized in recent years by high savings rates almost across the board. These high savings rates have provided financing for high levels of domestic investment in the region, but they also have led to large capital outflows or current account surpluses (Park and Shin 2009). Moreover, the stagnation of domestic investment in some of developing Asia since the onset of the Asian financial crisis (AFC) has increased even further the current account surpluses of developing Asia. Given this backdrop, what will happen to savings, investment, and growth in the next two decades? To answer this question, this chapter presents data on past trends in domestic savings rates in the 12 economies of developing Asia from 1966 to 2007, conducts an econometric analysis of the determinants of domestic savings rates in developing Asia during that period, projects trends in domestic savings rates in developing Asia during the next two decades based on the results of our econometric analysis, and discusses the implications of our findings for investment, growth, and economic policy in developing Asia.

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