This paper provides a quantitative assessment of the effect of various types of capital flow on the growth process of the East Asian countries, including China. The empirical analysis was based on dynamic panel data and we found; first, that domestic savings contribute positively to long-term economic growth. Second, we confirmed that FDI is growth enhancing and that its impact is felt both in the short and long run. Additionally, FDI influence on growth is much higher than domestic savings. Third, short-term capital inflow has adverse effect on the long-term as well as short-term growth prospects and it appears to be sensitive to long-term capital inflows. Fourth, long-term debt has positive effect on growth but its effect does somewhat disappear in the long-term. By and large, the observed positive contribution of FDI in the growth process of East Asian economies is a robust finding. From policy perspective, the evidence convincingly suggests that countries that are successful in attracting FDI can finance more investments and grow faster than those that deter FDI.

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This article examines the determinants of saving rates in five Asian (Asian-5; Malaysia, Singapore, Thailand South Korea and the Philippines) countries over the 1970–2000 period. The focus is on the relationship between savings rates and foreign capital inflows before and in the financial crises. Major findings from the dynamic panel regressions are: (i) foreign savings depresses domestic savings ratio in the short as well as in the long run and the offset appears to be larger in the crisis period; (ii) real interest has a small negative effect on savings in the short and long run; (iii) the demographic factor explains a large portion of the long run trends but not the short-term fluctuations in savings rates; and (iv) high savings ratios in the countries studied is linked to the export sector. Copyright Springer Science+Business Media, LLC 2005Savings, Foreign capital, Economic growth, F41, F43, G23,

This paper presents an internally consistent macroeconomic framework that could be used as a first step toward a more comprehensive quantitative and qualitative assessment of the adjustment alternatives facing Malaysia. An open economy model is developed to identify which of the gaps-savings, foreign exchange, and fiscal-become the binding constraints in the adjustment process of Malaysia as it strives to sustain economic growth in the postcrisis era. Using 1995 as a base year, the model is simulated over the short and medium terms to demonstrate a sharp trade-off between investment (economic growth) and capacity utilization under foreign exchange constraints.Developing countries have regularly faced economic shocks, including those originating from international trade, investment, and financial disturbances. These shocks disrupt the functioning of the economy and, eventually, the growth momentum. The result is long periods of economic instability and stagnation. Hence, configuration of the gap constraints is important for pursuing sustainable economic growth. In configuring these resource constraints, it is important to analyze the influence of factors such as the reliability of foreign capital inflow and strength effects of crowding-in and crowding-out of public and private

This paper investigates the determinants of savings in Asia and compares them with those of the economies in Latin America. The evidence based reveals that countries in the two regions share some common features with respect to their savings rates that are largely affected by (1) international capital inflows, which, in general, displace domestic savings in less than one-to-one fashion; (2) dependency ratios, hence supporting life-cycle hypothesis; and (3) the size of the export sector which can contribute positively to national savings. Despite these similarities, a number of important differences can be identified across country groups. First, economic growth affects national savings positively (negatively) in Asia (Latin America). Second, the long-term negative impact of capital flows on domestic savings appears to be considerably weaker in the Asian countries compared to the Latin American countries. Together, the two factors explain why savings ratios may differ markedly between the two regions.