Saving, Investment, and Current Account Surplus in Developing Asia

Publication | April 2009

Developing Asia has run large current account surplus after the Asian crisis due to oversaving and underinvestment of Asian countries. To rebalance Asian growth toward domestic sources, consumption has to be promoted rather than investment.

An integral part of global current account imbalances is the large and persistent current account surplus developing Asia has run since the 1997–1998 Asian crisis. A country's current account surplus is, by definition, equal to its net saving. The central objective of this paper is to investigate the extent to which the saving and investment rate of Asian countries can be explained by the underlying fundamental determinants of saving and investment such as gross domestic product growth and demographic factors. Its empirical analysis yields two key findings. First, this papers find stronger evidence of oversaving than underinvestment in the region. Second, it finds stronger evidence of overinvestment prior to the Asian crisis than underinvestment after the Asian crisis. This suggests that the key to rebalancing Asian growth toward domestic sources lies in promoting consumption rather than investment.


  • Introduction
  • Stylized Facts of Saving and Investment in Asia
  • Data and Empirical Framework
  • Empirical Results
  • Appendix 1: Description of Variable and Data Sources

Additional Details

  • Economics
  • Finance sector development
  • 1655-5252 (Print)

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