IDEAS home Printed from https://ideas.repec.org/a/spr/eurase/v8y2018i2d10.1007_s40822-018-0092-6.html
   My bibliography  Save this article

Fiscal policy and national saving in emerging Asia: challenge or opportunity?

Author

Listed:
  • Duy-Tung Bui

    (University of Economics Ho Chi Minh City
    University of Bourgogne Franche-Comté)

Abstract

Emerging Asian economies have been acknowledged with a relatively high saving rate for several decades compared to other parts of the world. Higher saving presents an opportunity for this region since it is considered a source of sustainable economic growth. However, average national saving rate in emerging Asia is on the verge of decline. If this is true, then governments in the region could face great challenges in pursuing their sustainable growth path. This paper investigates whether governments can use their traditional tool of fiscal policy to influence national saving, and counteract the declining trend. Using a panel data set of 16 emerging Asian markets from 1990 to 2016, the empirical findings point out several problems in the region. Fiscal authorities do not seem to be concerned about stabilizing the national saving rate. However, the national saving rate behaves in a Keynesian manner to fiscal policy. There is a lack of evidence that the region has effectively used the savings as a force of economic growth. Policy implications are also discussed.

Suggested Citation

  • Duy-Tung Bui, 2018. "Fiscal policy and national saving in emerging Asia: challenge or opportunity?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 305-322, August.
  • Handle: RePEc:spr:eurase:v:8:y:2018:i:2:d:10.1007_s40822-018-0092-6
    DOI: 10.1007/s40822-018-0092-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40822-018-0092-6
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s40822-018-0092-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Oliver Röhn, 2010. "New Evidence on the Private Saving Offset and Ricardian Equivalence," OECD Economics Department Working Papers 762, OECD Publishing.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. Canova, Fabio & Ciccarelli, Matteo, 2013. "Panel Vector Autoregressive Models: A Survey," CEPR Discussion Papers 9380, C.E.P.R. Discussion Papers.
    5. Frankel, Jeffrey A. & Vegh, Carlos A. & Vuletin, Guillermo, 2013. "On graduation from fiscal procyclicality," Journal of Development Economics, Elsevier, vol. 100(1), pages 32-47.
    6. Schclarek, Alfredo, 2007. "Fiscal policy and private consumption in industrial and developing countries," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 912-939, December.
    7. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
    8. Gyan Pradhan & Kamal Upadhyaya, 2001. "The impact of budget deficits on national saving in the USA," Applied Economics, Taylor & Francis Journals, vol. 33(13), pages 1745-1750.
    9. Marc Hayford, 2005. "Fiscal policy and national saving," Applied Economics, Taylor & Francis Journals, vol. 37(9), pages 981-992.
    10. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    11. Eduardo Cavallo & Mathieu Pedemonte, 2016. "The Relationship between National Saving and Investment in Latin America and the Caribbean," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 29-53, April.
    12. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
    13. Dobrescu, Loretti I. & Kotlikoff, Laurence J. & Motta, Alberto, 2012. "Why aren't developed countries saving?," European Economic Review, Elsevier, vol. 56(6), pages 1261-1275.
    14. Ferrarini , Benno & Ramayandi, Arief, 2015. "Public Debt Sustainability in Developing Asia: An Update," ADB Economics Working Paper Series 468, Asian Development Bank.
    15. Eswar S. Prasad, 2011. "Rebalancing Growth in Asia," International Finance, Wiley Blackwell, vol. 14(1), pages 27-66, April.
    16. Aygun Garayeva & Gulzar Tahirova, 2017. "Government Spending Effectiveness and the Quality of Fiscal Institutions," Business & Management Compass, University of Economics Varna, issue 2, pages 128-143.
    17. J. Humberto Lopez & K. Schmidt-Hebbel & Luis Servén, 2000. "How Effective is Fiscal Policy in Raising National Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 226-238, May.
    18. B. Douglas Bernheim, 1987. "Ricardian Equivalence: An Evaluation of Theory and Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 263-316, National Bureau of Economic Research, Inc.
    19. Rilind Kabashi, 2017. "Macroeconomic effects of fiscal policy in the European Union, with particular reference to transition countries," Public Sector Economics, Institute of Public Finance, vol. 41(1), pages 39-69.
    20. William T. Gavin & Athena T. Theodorou, 2005. "A common model approach to macroeconomics: using panel data to reduce sampling error," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(3), pages 203-219.
    21. Joanna Mackiewicz-Lyziak, 2015. "Fiscal Sustainability In Cee Countries – The Case Of The Czech Republic, Hungary And Poland," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(2), pages 53-71, June.
    22. Arin, K. Peren & Mamun, Abdullah & Purushothman, Nanda, 2009. "The effects of tax policy on financial markets: G3 evidence," Review of Financial Economics, Elsevier, vol. 18(1), pages 33-46, January.
    23. Ricardo J. Caballero & Arvind Krishnamurthy, 2004. "Fiscal Policy and Financial Depth," NBER Working Papers 10532, National Bureau of Economic Research, Inc.
    24. Tagkalakis, Athanasios, 2011. "Fiscal policy and financial market movements," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 231-251, January.
    25. Philip Arestis & Marco Flávio Cunha Resende, 2015. "Fiscal policy and the substitution between national and foreign savings," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 37(3), pages 436-458, July.
    26. Andrews, Donald W. K. & Lu, Biao, 2001. "Consistent model and moment selection procedures for GMM estimation with application to dynamic panel data models," Journal of Econometrics, Elsevier, vol. 101(1), pages 123-164, March.
    27. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
    28. Ray Barrell & Martin Weale, 2010. "Fiscal policy, fairness between generations, and national saving," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(1), pages 87-116, Spring.
    29. Cavallo, Eduardo A. & Pedemonte, Mathieu, 2015. "What is the Relationship between National Saving and Investment in Latin America and the Caribbean?," IDB Publications (Working Papers) 7204, Inter-American Development Bank.
    30. Domenech, Rafael & Taguas, David & Varela, Juan, 2000. "The effects of budget deficit on national saving in the OECD," Economics Letters, Elsevier, vol. 69(3), pages 377-383, December.
    31. Francisco de Castro & José Luis Fernández, 2013. "Does Ricardian equivalence hold? The relationship between public and private saving in Spain," Journal of Applied Economics, Universidad del CEMA, vol. 16, pages 251-274, November.
    32. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    33. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    34. Young Jun Chun, 2007. "Population Aging, Fiscal Policies, and National Saving: Predictions for the Korean Economy," NBER Chapters, in: Fiscal Policy and Management in East Asia, pages 339-372, National Bureau of Economic Research, Inc.
    35. Ferrucci, Gianluigi & Miralles, Cesar, 2007. "Saving behaviour and global imbalances: the role of emerging market economies," Working Paper Series 842, European Central Bank.
    36. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    37. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    38. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    39. Eric Wang & Eskander Alvi, 2011. "Relative Efficiency of Government Spending and Its Determinants: Evidence from East Asian Countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 1(1), pages 3-28, June.
    40. Jonathan Huntley, 2014. "The Long-Run Effects of Federal Budget Deficits on National Saving and Private Domestic Investment: Working Paper 2014-02," Working Papers 45140, Congressional Budget Office.
    41. Georgiadis, Georgios, 2012. "The panel conditionally homogenous vectorautoregressive model," MPRA Paper 37755, University Library of Munich, Germany.
    42. Olivier Jean Blanchard & Stanley Fischer (ed.), 1990. "NBER Macroeconomics Annual 1990," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262521555, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kazuki Hiraga, 2019. "Unit versus ad valorem tax comparisons in a simple New Keynesian dynamic stochastic general equilibrium model," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 459-466, December.
    2. Ecenur Ugurlu-Yildirim & Beyza Mina Ordu-Akkaya, 2022. "Does the impact of geopolitical risk reduce with the financial structure of an economy? A perspective from market vs. bank-based emerging economies," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 681-703, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oukhallou, Youssef, 2016. "Analyzing economic growth: what role for public investment?," MPRA Paper 69772, University Library of Munich, Germany.
    2. BUI, Duy-Tung & LLORCA, Matthieu & BUI, Thi Mai Hoai, 2018. "Dynamics between stock market movements and fiscal policy: Empirical evidence from emerging Asian economies," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 65-74.
    3. Rilind Kabashi, 2017. "Macroeconomic effects of fiscal policy in the European Union, with particular reference to transition countries," Public Sector Economics, Institute of Public Finance, vol. 41(1), pages 39-69.
    4. Hüseyin ŞEN & Ayşe KAYA, 2017. "Mali Konsolidasyon Büyüme ve İstihdam için Bir Çıpa mı, Mali Tuzak mı? Teorik ve Ampirik Literatür Temelli Bir Analiz," Sosyoekonomi Journal, Sosyoekonomi Society, issue 25(34).
    5. Ianc, Nicolae-Bogdan & Turcu, Camelia, 2020. "So alike, yet so different: Comparing fiscal multipliers across EU members and candidates," Economic Modelling, Elsevier, vol. 93(C), pages 278-298.
    6. Chibi Abderrahim & Chekouri Sidi Mohamed & Benbouziane Mohamed, 2019. "The Impact of Fiscal Policy on Economic Activity over the Business Cycle: An Empirical Investigation in the Case of Algeria," Review of Middle East Economics and Finance, De Gruyter, vol. 15(3), pages 1-23, December.
    7. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco & Benedetti, Marina, 2005. "Searching for Non-monotonic Effects of Fiscal Policy: New Evidence," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(S1), pages 197-217, October.
    8. Zouaoui, Haykel & Zoghlami, Feten, 2020. "On the income diversification and bank market power nexus in the MENA countries: Evidence from a GMM panel-VAR approach," Research in International Business and Finance, Elsevier, vol. 52(C).
    9. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
    10. Griet Malengier & Lorenzo Pozzi, 2005. "Examining Ricardian Equivalence by estimating and bootstrapping a nonlinear dynamic panel model," Money Macro and Finance (MMF) Research Group Conference 2005 61, Money Macro and Finance Research Group.
    11. Minhas Akbar & Ammar Hussain & Ahsan Akbar & Irfan Ullah, 2021. "The dynamic association between healthcare spending, CO2 emissions, and human development index in OECD countries: evidence from panel VAR model," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(7), pages 10470-10489, July.
    12. Christiane Nickel & Andreas Tudyka, 2014. "Fiscal Stimulus in Times of High Debt: Reconsidering Multipliers and Twin Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(7), pages 1313-1344, October.
    13. Oguzhan Cepni & Ibrahim Ethem Guney & Doruk Kucuksarac & M. Hasan Yilmaz, 2021. "Do local and global factors impact the emerging markets' sovereign yield curves? Evidence from a data‐rich environment," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(7), pages 1214-1229, November.
    14. Ana Mitreska & Sultanija Bojcheva – Terzijan, 2017. "Panel Estimation of the Impact of Foreign Banks Presence on Selected Banking Indicators in Macedonia," Working Papers 2017-04, National Bank of the Republic of North Macedonia.
    15. Ibrahim Ayoade Adekunle & Sheriffdeen Adewale Tella & Oluwaseyi Adedayo Adelowokan, 2021. "Macroeconomic policy volatility and household consumption in Africa," SN Business & Economics, Springer, vol. 1(3), pages 1-22, March.
    16. Rodolfo Cermeño & Bernardo D. Roth & F. Alejandro Villagómez, 2008. "Fiscal Policy and National Saving in Mexico, 1980-2006," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 23(2), pages 281-312.
    17. G. Malengier & L. Pozzi, 2004. "Examining Ricardian Equivalence by estimating and bootstrapping a nonlinear dynamic panel model," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/274, Ghent University, Faculty of Economics and Business Administration.
    18. Eichler, Stefan & Pyun, Ju Hyun, 2022. "Ricardian equivalence, foreign debt and sovereign default risk," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 21-49.
    19. Minea, Alexandru, 2008. "The Role of Public Spending in the Growth Theory Evolution," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(2), pages 99-120, June.
    20. Riveros Gavilanes, John Michael, 2020. "Military Expenditure and Economic Growth: The South American Case," MPRA Paper 98508, University Library of Munich, Germany.

    More about this item

    Keywords

    Fiscal policy; National saving; PVAR;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H5 - Public Economics - - National Government Expenditures and Related Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eurase:v:8:y:2018:i:2:d:10.1007_s40822-018-0092-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.