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Savings, Investment, Growth and Financial Distortions in Pacific Asia and Other Developing Areas

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  • Maxwell Fry

Abstract

I estimate a simultaneous-equation model in which the real deposit rate of interest and the black market exchange rate premium affect saving, investment, export growth and output growth. The estimates corroborate earlier findings that directeffects of financial distortions on savings are minuscule. Because a major determinant of savings is the output growth rate, however, I find that saving is influenced substantially, albeit indirectly, by financial distortions through their effect on investment, export growth, and output growth. Simulations indicate that difference in the average values of the financial distortion variables explain approximately 50 percent of the difference in saving ratios and 75 percent of the difference in out put growth rate between five Pacific Asian countries and 11 countries in other developing areas. [E20, E44, F41, O11, O16]

Suggested Citation

  • Maxwell Fry, 1998. "Savings, Investment, Growth and Financial Distortions in Pacific Asia and Other Developing Areas," International Economic Journal, Taylor & Francis Journals, vol. 12(1), pages 1-24.
    • Handle: RePEc:taf:intecj:v:12:y:1998:i:1:p:1-24
    DOI: 10.1080/10168739800000001
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    3. Muhammad Salman Ahmad & Elżbieta Izabela Szczepankiewicz & Dai Yonghong & Farid Ullah & Ihsan Ullah & Windham Eugene Loopesco, 2022. "Does Chinese Foreign Direct Investment (FDI) Stimulate Economic Growth in Pakistan? An Application of the Autoregressive Distributed Lag (ARDL Bounds) Testing Approach," Energies, MDPI, vol. 15(6), pages 1-16, March.
    4. Amaira Bouzid, 2013. "Governance, Financial Liberalization And Economic Growth: Dynamic Panel Data Approach," Romanian Economic Business Review, Romanian-American University, vol. 8(2), pages 59-74, June.
    5. Zaheer Abbas, 2020. "Re-assessing the Contribution of Energy Consumption to GDP Per- Capita: Evidence from Developed and Developing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 404-410.
    6. Assa, Maganga & Abdi, Edriss K., 2012. "Selected Macroeconomic Variables Affecting Private Investment in Malawi," MPRA Paper 40698, University Library of Munich, Germany.
    7. Mamoon, Dawood & Nicholas, Howard, 2017. "Financial Liberalisation and Economic Growth: A Preliminary Analysis," MPRA Paper 82976, University Library of Munich, Germany.
    8. Mamoon, D., 2004. "Financial sector reforms in Pakistan and a test for McKinnon and Shaw's transmission mechanism : 'Lessons from the last decade'," ISS Working Papers - General Series 19157, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    9. Dobdinga Cletus Fonchamnyo & Gildas Dohba Dinga & Vahsegmi Carolle Ngum, 2021. "Revisiting the nexus between domestic investment, foreign direct investment and external debt in SSA countries: PMG‐ARDL approach," African Development Review, African Development Bank, vol. 33(3), pages 479-491, September.
    10. Jalal U. Siddiki, 2002. "Unofficial Exchange Rates In Bangladesh: A Cointegration Analysis," Contemporary Economic Policy, Western Economic Association International, vol. 20(3), pages 288-300, July.
    11. Ahsan Abbas & Eatzaz Ahmed & Fazal Husain, 2019. "Political and Economic Uncertainty and Investment Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(3), pages 307-331.
    12. Shahbaz Nasir & Mahmood Khalid, 2004. "Saving-investment Behaviour in Pakistan: An Empirical Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 665-682.

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