Saving-Investment Relationship, Financial Crisis and Structural Changes in East Asian Countries

In this article, the impact of the Asian crisis on the saving-investment relationship of selected East Asian countries with the rest of the world is examined using a Markov switching regression on East Asian countries. As a first result, estimates of the saving retention coefficients show that for most Asian countries, the Asian crisis period marks a shift from high saving retention coefficients during the pre-crisis period to low ones up to the end of the sample period. Low saving retention coefficients are also observed during the 1980s decade. For some countries, these coincide with certain phases of their development. A second result of interest is that periods with relatively low coefficient estimates, implying relatively higher capital mobility, are associated with current account surpluses. This result can be more explained by high and stable domestic saving rates than by low investment rates.