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The authors are grateful to Geoffrey Bascand, Christopher Browne, Guy Debelle, Robert Dekle, Hamid Faruqee, Sara Johansson, Gunnar Jonsson, Jonathan Ostry, David Robinson, Hossein Samiei, and Anoop Singh for helpful comments.
Ostry (1997) shows that the current account deficits in Indonesia, Malaysia, and Thailand are sustainable, but could pose risks.
See Bank of Thailand (1996) for a recent discussion of these issues and their relevance for Thailand.
There are a number of studies on financial sector development (e.g., Fry, 1995 provides an overview), but the data used in these studies are relatively scant and tend not to be internationally comparable.
Causality tests by Carroll and Weil (1993) found growth to “Granger-cause” saving and not vice versa.
The permanent-income hypothesis also brings up possible estimation problems when growth is used to explain saving because, if unexpected income growth is saved, a short-term correlation between current income and saving results (Faruqee and Husain, 1995).
Some theoretical considerations about the ambiguity of the Harberger-Laursen-Metzler effect, however, remain. They relate in particular to whether the terms-of-trade shocks are anticipated or not and to whether they are temporary or permanent (Svensson and Razin, 1983).
Ideally, private saving would have been estimated using the consolidated general government surplus, but these data are not available for all countries.
While it would be useful to examine the effects on private saving of the composition of government spending, that is, consumption and investment expenditure, the data are not available on a comparable basis for the entire sample period.
For a description of the institutional setup and financing of Singapore’s Central Provident Fund, see Carling and Oestreicher (1995).
Although introduced in 1981, the scheme effectively went into operation in the mid-1980s.
In Malaysia and Singapore, contributors to the pension funds may withdraw a fraction of their savings for housing and medical expenses. In some cases, it is also possible to withdraw savings a few years before retirement.
To capture the effect of foreign saving on private saving, a number of variables that could proxy for external resource constraints—such as the current account, the ratio of exports to GDP, and the debt-service ration—were tested as regressors, but were excluded from the final results because of problems of endogeneity or because they were insignificant.
The instrumental variables used were, for the government balance, lags of the government balance, inflation, and terms-of-trade changes; for growth, its moving average; for broad money over GDP, its lagged value.
The inclusion of time dummies did not significantly influence the estimated coefficients and these are excluded in the results reported below. The Prais-Winsten algorithm was applied to estimate a first-order autocorrelation model, but the results remained robust.
The results on the coefficient of the government balance in the case of Latin America could also be affected by the high levels of inflation in the region. In a regime of high inflation or hyperinflation, nominal interest payments on government debt are likely to increase, causing the fiscal deficit to rise. These payments are, however, mostly payments to the private sector where they would be reflected in higher savings. Hence, the estimates of the offset coefficient in Latin America may be affected by an inflationary bias in the national accounts data.
Using a time dummy for the switch from the pay-as-you-go to the fully funded pension scheme in Chile after 1983 showed that this transition had a substantial positive effect on private saving.
Ogaki, Ostry, and Reinhart (1996) also show that the responsiveness of private saving to changes in real interest rates is a function of a country’s income level. The study does not examine the effect of real interest rates on saving as interest rate data are not available for the countries in the sample over the entire period.