Determinants of domestic savings in asean developing countries in the period 1986 2000, the case of VN

' UNI,rVERSITY OF ECONOMICS ·rt INSTITUTE OF SOCIAL STUDIES · HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS ·; VIET NAM- THE NETHERLANDS PROJECT FOR M.A ON DEVELOPMENT ECONOMICS DETERMINANTS OF DOMESTIC SAVINGS IN ASEAN DEVELOPING COUNTRIES IN THE PERIOD 1986-2000, THE CASE OF VIET NAM A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN ECONOMICS OF DEVELOPMENT ' ~, Academic Supervisor: Dr NGUYEN TRQNG HOAI HOCHIMINH CITY, NOVEMBER 2003 CERTIFICATION "I ,certifY that the substance of this dissertation has not already been submitted for any degree and is not being currently submitted for any other degree I certifY that to the best of my knowledge any help received in preparing this dissertation, and all source used, have been acknowledgement in this thesis." Ph~;tm Dinh Long Date: November 51\ 2003 ACKNOWLEDGMENTS First of all, I would like to express my sincere thanks to all teachers and the st~f in Viet Nam - the Netherlands Project for M.A on Development Economics, especially Mr Tran Yo Hung Son, Mr Nguyen Huu Dung and Ms Tran Thi Ben They have created an excellent environment for our study Many thanks are also released to Ms Dinh Anh Nguyet, the project secretary and Ms Dang Kim Chi, the project librarian for their assistance during the whole course I am grateful to Dr Karel Jansen, Dr Youdi Schipper and Dr Joost Buurman for their comments on the thesis proposal Especially, I am indebted to the knowledge got from Dr Karel Jansen in the field Money and Banking, his useful and interesting lecture as well as works relating to finance dropped a hint for me to follow this research ,I am so fortunate to be guided by Dr Nguyen Trang Hoai His deep understanding on Econometrics and Savings is invaluable for my thesis His enthusiasm and encouragement made me more confident in the difficult times I hope my result is not a disappointment to him I would like to thank all my classmates, friends and colleagues at Labor and social · Affairs School HCM city for their support in my study process Last but not least, God bless my parents and lovely relatives There is no word to reveal my love to them I hope they would consider this thesis as one of worthy gifts from me ABSTRACT A savings rate of a country has been considered as one of the most crucial sources for capital formation that can be translated to improve its ec~nomi growth rate For the past decades, selected ASEAN developing countries (Indonesia, Malaysia, the Philippines, Thailand and VietNam) have attained miracle in economic development They are all in the process of regional integration with greater overall openness of economies and an ongoing liberalization of their finance, trade and investment regime However, from the 1997 financial crisis and its consequences for ASEAN countries' economies, one of the lessons withdrawn is that these countries passively depended much on foreign capital Therefore, realizing the determinants of domestic savings in these countries is necessary to mobilize and well use the available resource for high and sustainable economic growth Basing on the integrated theory of savings and previous empirical works, this study also found income growth, demographics, financial liberalization and financial development are main factors explain for the domestic savings in Southeast Asian countries The regression result gave out the positive impacts of income growth on domestic savings in VietNam and Indonesia; the positive effects of financial development on domestic savings in Viet Nam and Malaysia Furthermore, the negative impacts of age dependency ratio and real interest rate on domestic savings are revealed in all five countries In order to mobilize domestic savings for modernization and industrialization, Vietnamese government should try to stabilize socio-economic problems, control inflation, reform stateowned enterprises and encourage the development of private sectors, continue to improve the effectiveness of financial and banking sectors as well as birth-control and family pla'nning programme ABBREVIATIONS ADB: Asian Development Bank A SEAN: Association of Southeast Asian Nation DEP: Age Dependency Ratio FDI: Foreign Direct Investment GOP: Gross Domestic Product GDS: Gross Domestic Savings GSO: General Statistics Office IMF: International Monetary Fund M2: Broad Money ;:-;, ODA: Official Development Assistance RIR: Real Interest Rate USD: United State Dollar VND: VietNam Dong WDI: World Development Indicators ii TABLE OF CONTENTS ABSTRACT , ABBREVIATIONS .11 LIST OF TABLES V LIST OF FIGURES V CHAPTER 1: INTRODUCTION 1.1 PROBLEM STATEMENT 1.2 OBJECTIVES OF THE STUDY 1.3 DATA AND RESEARCH METHODOLOGY 1.4 STRUCTURE OF THESIS CHAPTER 2: LITERATURE REVIEW 2.1 DEFINITIONS 2.2 SELECTIVE THEORIES OF SAVINGS 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 KEYNESIAN SAVINGS FUNCTION ." THE PERMANENT INCOME HYPOTHESIS THE LIFE CYCLE HYPOTHESIS THE McKINNON- SHAW'S FINANCIAL LIBERALIZATION 14 INTEGRATED SAVINGS THEORY 21 2.3 EMPERICAL STUDIES OF DETERMINANTS OF SAVINGS 22 2.3.1 2.3.2 2.3 2.3.4 2.3.5 INCOME AND ECONOMIC GROWTH 22 · DEMOGRAPHICS 24 REAL INTEREST RATE 25 FINANCIAL DEVELOPMENT 28 THE STUDY OF VIETNAM INSTITUTE OF FINANCE 29 I 2.4 SUMMARY 29 CHAPTER 3: DETERMINANTS OF DOMESTIC SAVINGS IN ASEAN COUNTRIES: AN OVERVIEW · 31 3.1 SIMILARITIES OF THE FIVE ASEAN COUNTRIES 31 iii 3.2 GROWTH, DEMOGRAPHICS AND FINANCIAL LIBERALIZATION 31 3.2.1 3.2.2 3.2.3 A SEAN ECONOMIC GROWTH 31 ASEAN POPULATION BOOM, HIGH DEPENDENCY RA TJO 33 FINANCIAL LIBERALIZATION IN ASEAN COUNTRIES 36 3.3 SITUATION AND POLICIES ENCOURAGING SAVINGS IN VIETNAM 41 3.3.1 3.3.2 l3.3 OVERVIEW OF ECONOMY AND ACCUMULATION BEFORE 1988 41 STABILIZATION, REFORM AND CONSOLIDATION AFTER 1988 43 IMPACTS OF ECONOMIC REFORM ON SA VINGS 45 3.4 SUMMARY 52 CHAPTER 4: DETERMINANTS OF DOMESTIC SAVINGS IN ASEAN DEVELOPING COUNTRIES, THE CASE OF VIET NAM 55 4.1 MODEL SPECIFICATION AND ESTIMATION METHOD ~ 55 4.2 DATA SOURCES 60 4.3 ESTIMATION RESULTS 60 4.4 MAIN FINDINGS 68 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 73 5.1 CONCLUSIONS OF THE THESIS 73 5.2 POLICY IMPLICATIONS 74 5.3 SUGGESTIONS FOR FURTHER STUDY 77 APPENDIX 1: DATA SET (0/o) 78 APPENDIX 2: DESCRIPTIONS OF HYPOTHESES TESTING 79 APPENDIX 3: REGRESSION RESUL TS 81 REFERENCES 84 iv LIST OF TABLES Table 3.1 GDP Growth Rates in Selected Asean Developing Countries 32 Table 3.2 The Size of Population, 1975 and 1998 33 Table 3.3 Average Population Growth per Annum during 1980-1997 34 Table 3.4 Public Savings and GovernmenJ Compensation for Losses(%) 43 Table 3.5 Investment and Saving (% GDP), 1990-2000 45 Table 3.6 Savings Portfolio by Vietnamese Households 1992-93 and 1997-98 48 Table 3.7 Structure of Invested Capital, 1986 - 2000 (Billion VND) Table 3.8 Capital Mobilization of Banking Sector (Billion VND) 51 Table 4.1 Data Matrix 57 Table 4.2 Financial Deeping, End-1997 (%) 71 48 LIST OF FIGURES Figure 2.1 Schematic Life-Cycle Profiles of Earnings and Consumption 11 Figure 2.2 Savings and Investment under Interest Rate Ceilings 16 Figure 3.1 ASEAN GDP Growth Rate Per Capita during 1986-2000 35 Figure 3.2 Economic Growth and Inflation during 1990- 2000 44 Figure 3.3 Government Savings in the Period 1986- 2000 47 Figure 3.4 Saving Trend of VietNam Compared with Asean-4 Countries 54 v CHAPTER 1: INTRODUCTION 1.1 PROBLEM STATEMENT A main problem in economic development theory is how to increase the resources available for capital formation, or how to control consumption and increase savings (Jansen 1990, p.8I) The allocation of resources between present and future consumption (savings) is one of the most fundamental economic choices facing any economy This choice affects not only the rate of economic growth a country can enjoy, but also the standards of living for future generations jet unborn (Gillis, Perkins, Roemer and Snodgrass I 996, p.304) Traditional development theories have put much emphasis on the importance of savings in determining economic growth rate in developing countries According to Jansen (1990), the resources available for investment and economic growth in any country can be increased through more domestic savings or through a larger capital inflqw from abroad Although many developing countries relied heavily on foreign savings as a source of investment finance, the rise in investment ratios was accompanied by aroughly commensurate increa~ in the share of gross domestic savings in GOP (Gillis, , Perkins, Roemer and Snodgrass I 996, p.305) The high ratios of domestic savings and investment are one of the striking features of East Asian and Southeast Asian economies ln reality, these high ratios have been reliable foundation for the higher economic growth rate of these countries (Le et all2002, p I 00) In general, there are many evidences showing the same trend in which domestic savings and economic growth rates go in the same direction Basing on this, many governments in developing countries attempt to raise savings rate in order to achieve high and sustainable growth rates Therefore, it would be necessary to deeply understand what determine ' domestic savings so that policy makers can effectively employ the suitable solutions to booster this kind of resource For the past decades, ASEAN developing countries have spent the dynamic period of economic development As a member of ASEAN, VietNam gradually proves its position in the region Viet Nam's economic reforms and 'open-door' policy since 1986 have restructured the economy from a 'highly centralized planned economy' to a 'market-oriented economy' regulated by the government (Kashiwaghi 1999, p.l33) This country achieved a remarkably high average growth rate of 6.53% percent per annum during tlie period 1986 2000 (WDI, 2002) However, according to Le (1997), it is able to see that VietNam is in the ' group of low level of domestic savings countries such as the Philippines, Laos, Myanmar, Cambodia and relatively far distance from the rest of ASEAN countries VietNam is in the process of industrialization and modernization The demand for capital to meet the development need is quite high (Nguyen, 2001) and savings are encouraged to increase so as to finance for that process Therefore, this thesis focuses on the topic 'Determinants of domestic savings in ASEAN developing countries in the period 1986 -2000, the case of VietNam' 1.2 OBJECTIVES OF THE STUDY Basing on the integrated theory of savings and previous empirical studies on determinants of savings in developing countries, this thesis aims to view the impacts of some main factors such as income growth, age dependency ratio, real interest rate and financial development CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 5.1 CONCLUSIONS OF THE THESIS The resources available for investment and economic growth in any country can be increased through more domestic savings or through a larger capital inflow from abroad For the past decades, selected ASEAN developing countries have attained miracle in economic development It could be said that these countries developed to relatively high degree the effects of foreign resources and domestic accumulations However, from the 1997 financial crisis and its consequences for ASEAN developing countries' economies, one could withdraw the instability and limitation on the way of development ofthese countries One of the lessons is that these countries passively depended much on foreign capital Therefore, realizing the determinants of domestic savings in these countries is necessary in order to mobilize and make good use of the available resource for high and sustainable economic growth The previous studies indicated that income growth, demographics, financial liberalization and development are main factors explain for the high savings in East and Southeast Asian countries In this thesis, basing on the integrated theory of savings and empirical studies to specifY the model and estimation method, the regression result gives out the positive impacts of income growth on domestic savings in VietNam and Indonesia; the positive effects of financial development on domestic savings are found in Malaysia and Viet and real interest rate , , Nam Furthermore, the negative impacts of age dependency ratio on domestic savings are revealed in all five countries In order to mobilize domestic savings for modernization and industrialization, Vietnamese government has tried to stabilize socio and economic problems, control inflation and maintain the high economic growth rate; continued to improve the effectiveness of financial 73 and banking sectors as well as give out policy curbing the population growth rate These solutions have proved their active impacts on domestic savings in the past years The econometric result also supports for this evaluation 5.2 POLICY IMPLICATIONS Based on above results as well as previous works, the measures for encouraging domestic savings in these countries maybe: FOR ASEAN-4 COUNTRIES • Economic Growth and Macroeconomic Stability Despite the positive impacts of GOP growth on domestic savings are not affirmed in the regression model in these countries except Indonesia (maybe shortage data and imperfect function form), most of empirical studies suggest that high economic growth is the main factor contributed for high domestic savings in these countries for the past years • Material and Immaterial Measures in Curbing Population Growth In ASEAN countries, national population strategies began from 1950s, 1960s These strategies concentrated on controlling the birth rate by using nationwide family planning Governments encouraged popular and cheap contraceptive methods However, the success of these measures varied from countries Worse, birth-control plan seemed to have little effect in Philippines (Lim Chong Yah 2002, p.374) Therefore; another approach government could apply to practise birth-control is to adjust fair reward and fair punishment solutions by two directions: material and immaterial The first relates to tax and price assistance policies For example, to limit the number of children of a household, government 74 could cancel subsidy or levy a level of tax on a couple if there are more children than regulated The immaterial ways consist of reinforcing education for girls and employment opportunity for women So as to get the optimal result, both of them should be applied • Financial Reform From 1997, these countries have faced serious financial crisis and its consequences To meet the demand of IMF so as to recover and continuously develop their economies, some of countries such as Thailand and Indonesia must reform their financial sectors Therefore, the financial system should be comprehensively developed and financial intermediaries well their functions Moreover, the appropriate structure of financial market as well as the clear financial environment should be applied to ensure the effective operations of financial organizations Then the success of financial Iiberalization could be attained FOR THE CASE OF VIETNAM • Maintaining the Sustainable and High Economic Growth From 'doi moi', Vietnamese economy has attained relatively high growth rate However, the economic potential and comparative advantages have not jet well exploited The recent economic fluctuations show unstable and limited features of our growth model Fiscal andmonetary policies only had moderate impacts on increasing demand and controlling inflation (Le et all 2002, p.152) Therefore, actively implementing Business Law, innovating stateowned enterprises, abrogating license and creating favorable conditions for import and export, establishing effective stock markets in Ho Chi Minh and HaNoi, reforming financial sectors as well as appropriate investment policy and clear investment environment, 75 Vie'tnamese economy could ga111 high and sustainable growth rate for years onward Domestic savings, therefore, have basis for rising • Birth-Control and Family Planning For raising domestic savings, one of the important solutions of VietNam should be reducing the dependency ratio In reality, Vietnamese fertility rate is still high, especially in the remote, far-flung and poor areas Therefore, improving the living standard as well as the quality of education and popularizing the cheap and easy birth-control methods are necessary in curbing the population growth The best way is to help households themselves find the profit of few children family size Women have more job opportunities outside their homework • Declining the Real Rate oflnterest but Ensuring Real Deposit Rate Mechanism As analyzed, the positive impact of real interest rate on savings has not jet absolutely proved by theoretical and empirical evidences Our testing for the determinants of domestic savings in selected ASEAN countries and VietNam also denies this relation In reality, the level of savings of VietNam in the 'doi moi' period strongly increased compared with the former stage meanwhile the real deposit rates had decreased tendency Therefore, if choosing financial liberalization (raise real rate of interest) to encourage domestic savings seems to be adventure, especially in the current condition of Viet Nam when the profitable level in the ' economy gets decline trend and the ratio of borrowing to total capital is very high about 8090% (Nguyen, C.N and Nguyen, H.l-1 2000, p.98) Therefore, increasing interest rates could make the business more difficulties, economic growth - the main determinant of savings could decrease On the other hand, decreasing the level of interest could have the active 76 impact on domestic accumulations if the positive interest rate mechanism is maintained and there is no pressure for rising interest rate in the next time • Expanding and Enlightening Banking Network, Creating Confidence and Diversifying Banking Services When the network of banking and financial intermediaries covered everywhere in the country, private accumulation was pushed from both sides: banks and customers themselves Enlightening the banking sector and creating the customer's trust are essential conditions for the operation ofthe financial system The stability of money system is also an essential basis for establishing the customers' confidence on baking sector Furthermore, diversifying banking services should be done to effectively attract currency in circulation outside the bank 5.3 SUGGESTIONS FOR FURTHER STUDY The limitation of the thesis is the availability of data as Viet Nam has just opened its economy since 1986 The analysis of determinants of domestic savings in these countries, therefore, is still limited Although the overall as well as private tendency of savings in selected countries is found, the regression result is not completely The impacts of financial liberalization and financial development on savings in these countries need to be more studied 77 APPENDIX 1: DATA SET(%) obs GDS? OEP? RIR? M2? VN-1986 4.82 0.81 _VN-1987 5.13 0.8 0.79 _VN-1988 7.3 _VN-1989 4.42 0.78 _VN-1990 5.98 0.77 _ VN-1991 16.52 0.76 _ VN-1992 20.2 0.75 1-VN-1993 16.01 0.74 1-VN-1994 17.88 0.73 r-VN-1995 16.34 0.72 _ VN-1996 13.99 0.7 - VN-1997 20.16 0.68 _ VN-1998 21.3 0.66 1-VN-1999 22.56 0.64 VN-2000 25.11 0.62 19.94 0.78 PL-1986 t-1-PL-1987 17.96 0.78 r-PL-1988 20.06 0.78 e-PL-1989 19.85 0.78 1-PL-1990 18.38 0.78 r-PL-199 I 17.22 0.77 1-PL-1992 16.44 0.76 _PL-1993 15.53 0.74 _PL-1994 17.75 0.73 _PL-1995 14.63 0.72 r-PL-1996 15.24 0.71 1-PL-1997 14.44 0.7 r-PL-1998 13.71 0.69 1-PL-1999 18.91 0.68 PL-2000 23.98 0.68 r-10-1986 28.22 0.72 J0-1987 31.19 0.7 , ID-1988 31.53 0.68 '-ID-1989 35.44 0.67 _ID-1990 32.26 0.65 _10-1991 33.25 0.64 _ID-1992 33.41 0.63 _ID-1993 32.46 0.62 r -11.818.7 -2.3 16.43 -6.2 16.7 4.3 26.5 -3.7 27.07 -1.3 26.1 0.9 25 1.1 23 24.09 0.4 23.03 0.28 23.8 2.04 26 28.4 6.75 40.4 5.02 51.9 14.2 27.38 5.4 26.06 5.7 26.23 9.4 28.79 9.9 31.11 5.6 32.18 10.7 34.24 7.3 38 4.6 42.15 6.6 46.85 6.7 50.9 9.5 56.21 5.7 58.9 3.5 59.53 60.18 17.9 23.64 6.3 23.75 12.4 25.38 10.6 28.01 12.2 33.94 15.4 36.81 17.7 38.68 10.8 39.75 GOP? 2.79 3.58 5.14 7.36 5.1 5.96 8.65 8.07 8.84 9.54 9.34 8.15 5.8 4.8 5.5 3.42 4.31 6.75 6.21 3.04 -0.58 0.34 2.12 4.39 4.68 5.85 5.19 -0.58 3.4 4.01 5.96 5.3 6.36 9.08 8.93 7.22 7.25 obs GDS? OEP?RIR? M2? _ID-1993 32.46 f-ID-1994 32.2 e-ID-1995 30.59 e-ID-1996 30.08 f-ID-1997 31.48 e-ID-1998 26.53 e-ID-1999 20.2 ID-2000 ~5.72 _ML-1986 29.36 _ML-1987 34.74 _ML-1988 33.75 _ML-1989 34.21 _ML-1990 34.34 f-ML-1991 31.97 ML-1992 37.33 1-ML-1993 38.2 _ML-1994 38.14 _ML-1995 39.21 _ML-1996 43.49 _ML-1997 43.68 _ML-1998 48.82 _ML-1999 47.21 ML-2000 46.71 _TL-1986 27.91 _TL-1987 28.43 _TL-1988 31.2 '-TL-1989 32.5 r-TL-1990 33.84 _TL-1991 36.3 TL-1992 35.95 ,TL-1993 36.19 _TL-1994 35.34 _TL-1995 35.13 _TL-1996 35.32 _TL-1997 34.75 _TL-1998 36.2 _TL-1999 32.57 '-TL-2000 30.73 0.62 0.61 0.61 0.59 0.58 0.57 0.55 0.54 0.72 0.71 0.7 0.68 0.67 0.67 0.67 0.67 0.66 0.66 0.65 0.64 0.63 0.62 0.62 0.63 0.62 0.6 0.58 0.57 0.55 0.54 0.52 0.51 0.49 0.48 0.47 0.46 0.45 0.44 10.8 9.3 8.3 9.5 8.2 -24.6 10.9 6.7 21.2 2.5 3.5 2.4 3.2 4.4 6.7 4.9 3.5 3.9 5.8 1.9 7.3 1.9 11.5 5.7 5.3 5.8 8.2 9.1 7.3 7.6 5.4 7.3 8.9 9.2 4.6 13.9 5.9 39.75 41.19 42.92 46.58 49.83 47.95 54.44 53.52 70.79 68.23 63.05 61.5 61.28 61.52 65.98 71.87 75.27 77.43 83.32 90.38 96.4 97.88 97.62 55.82 56.94 56.57 58.25 62.66 67.05 69.77 72.94 73.41 73.22 76.11 85.09 98.34 105.97 104.16 GOP? 7.25 7.54 8.4 7.64 4.7 -13.13 0.85 4.77 1.15 5.39 9.94 9.06 9.01 9.55 8.89 9.89 9.21 9.83 10 7.32 -7.36 6.08 8.3 5.53 9.52 13.29 12.19 11.17 8.56 8.08 8.38 8.95 9.31 5.88 -1.45 -10.77 4.22 4.31 Notes: VN: VietNam, PL: the Philippines, ID: Indonesia, ML: Malaysia, TL: Thailand 78 APPENDIX 2: DESCRIPTIONS OF HYPOTHESES TESTING In panel data model we are interested in testing two types of hypotheses: hypotheses about the variances and co variances of the stochastic error terms and hypotheses' about the regression coefficients Testing Hypotheses about the Error Covariance Matrix It is helpful to think about restricted and unrestricted error covariance matrices An error covariance matrix is a square matrix with the error variances of the individual cross-sectional equations along the diagonal and with the contemporaneous error covariances on the off-diagonal elements All covariance matrices are symmetric, so if we specify an error covariance matrix for a panel model with five cross-sectio.nal units we have a (5x5) matrix with five diagonal units and ten off-diagonal units: cr1 crl2 crl3 cr14 cr1s- cr/ cr23 cr24 cr2s cr/ cr34 cr3s cri cr4s cr/ If we assume an error covariance matrix for a panel model that its cross-sectional units not have any contemporaneous cross-equation error covariances then the matrix will be like that: cr1- 0 0 cr/ 0 cr/ 0 cr/ crs In this case the model involves imposing ten restrictions Finally, if we supposed an error covariance matrix for a panel model that its stochastic disturbances were free of cross-sectional heteroskedasticity then the matrix will be like that: cr2 0 0 cr2 0 0 cr2 cr2 cr2 79 Here four restrictions would be imposed Testing these restrictions is accomplished by means of a test called a likelihood ratio test As such, it is a number bounded by zero and one If we form a ratio of the likelihood of a restricted model L"R divided by the likelihood of an unrestricted model L"u, we expect the ratio to be less than because the maximum likelihood subject to a restriction can be no greater than the maximum likelihood of the unrestricted model Then 0::; a::; I Define the likelihood ratio: If the restricted model is not significantly different from the unrestricted model we expect the likelihood ratio to be close to I The distribution theory of the likelihood ratio is a bit cumbersome However, it is well-known that the distribution of -2 x a is asymptotically Chi-Square, so that in any application with a sufficiently large sample size we can use: -2 x log(a) = -2 (log(L"R) -log(L"u)) approx :~ Under the null hypothesis we expect -2 x xq where q is the number of restrictions ato be close to zero; we reject the null hypothesis if the realized value of the likelihood ratio statistic exceeds an appropriate critical value or if the p-value of the test is smaller than the pre-selected significance level Testing Restrictions on the Panel Data Model After a sound specification for the error covariance structure has been established, tests associated with the general to simple modeling strategy may be undertaken These tests may be the usual Wald tests or t-tests on individual coefficients When the the cross-section weights or SUR (Seemingly unrelated regression) methods or any AR(p) specification is used, the results all asymptotically based so that the t-stats are approximately standard normal and the Wald F-stats are approximately Chi-Squared 80 APPENDIX 3: REGRESSION RESULTS MODEL Dependent Variable: GDS? Method: GLS (Cross Section Weights) Variable Coefficient Std Error - VN GDP VN - PL GDP PL - ID GDP ID - ML GDP ML - TL GDP- TL - VN DEP VN - PL DEP PL ID DEP ID ML DEP ML - TL DEP- TL - VN RIR VN - PL RIR PL ID RIR ID ML RIR ML - TL RIR- TL VN M2 VN PL M2 PL ID M2 ID ML M2 ML - TL M2- TL t-Statistic Pro b 0.608145 1.153827 0.2541 0.352122 0.297692 0.10208 0.129334 35.79478 178.3671 97.5208 28.89639 23.26224 0.375984 0.345191 0.178385 0.102444 0.91577 3.008415 -0.583863 -0.859027 -2.87112 -0.039073 0.28969 -1.826034 -3.600325 -0.344459 -0.504187 -2.201589 0.3642 0.0041 0.5619 0.3944 0.0060 0.9690 0.7733 0.0738 0.0007 0.7319 0.6163 0.0323 -2.777391 0.0077 -0.012585 0.166845 -0.146532 -0.021288 0.9900 0.8682 0.8841 -0.01042 0.230024 0.221588 0.524111 0.489466 0.9831 0.293856 0.063581 4.621776 0.0000 -0.268022 0.097101 -2.760244 0.0081 0.701695 0.322463 0.895581 -0.059601 -0.111102 -102.7711 -6.969315 28.25078 -52.76581 -83.7516 -0.129511 -0.17404 -0.392731 -0.284526 -0.002895 0.036971 -0.076799 Fixed Effects VN C 83.94962 - PL C ID C 26.05111 11.75975 ML C 53.33689 TL C 98.34395 Weighted Statistics R-squared Adjusted R-squared 0.990895 0.986525 Mean dependent var S.D dependent var 34.95819 23.46805 S.E ofregression 2.724216 Log likelihood -158.8653 Durbin-Watson stat 1.337948 Unweighted Statistics Sum squared resid F-statistic Prob(F-statistic) 371.0676 286.4026 0.0000 R-squared Adjusted R-squared S.E of regression Durbin-Watson stat Mean dependent var var S.D dep~nt Sum squared resid 26.9312 I 0.50361 371.0676 0.954549 0.932732 2.724216 1.193056 81 MODEL C Dependent Variable: GDS? Method: Pooled Least Squares Sample: 1986 2000 Total panel (balanced) observations: 75 Variable Coefficient Std Error t-Statistic Pro b - VN GDP VN 0.701695 0.430336 1.630573 0.1093 - PL GDP PL - ID GDP ID 0.322463 0.321545 1.002855 0.3208 0.895581 0.307564 2.911851 0.0054 - ML GDP ML - TL GDP- TL -0.059601 0.193645 -0.307784 0.7595 -0.111102 0.168529 -0.659244 0.5128 VN DEP_VN -102.7711 25.32914 -4.057427 0.0002 d PL DEP PL - ID DEP ID - ML DEP ML - TL DEP- TL -6.969315 162.8781 -0.042789 0.9660 28.25078 0.7803 I 00.7548 0.280391 -52.76581 54.8162 -83.7516 -0.962595 30.31184 -2.763 0.3404 0.0080 - VN RIR VN -0.129511 0.266054 -0.486785 0.6285 - PL RIR PL -0.17404 0.5833 0.315215 -0.552132 ID RIR ID -0.392731 0.184301 -2.130922 0.0380 ML RIR ML -0.284526 0.194335 -1.464103 0.1494 - TL RIR- TL VN M2 VN -0.002895 0.299733 -0.009658 0.9923 0.036971 0.8146 - PL M2 PL - ID M2 ID -0.076799 0.478599 -0.160467 0.8732 -0.01042 0.505698 -0.020605 0.9836 0.293856 0.120612 2.436372 0.0184 - ML M2 ML - TL M2- TL 0.1568 0.235783 -0.268022 0.126527 -2.1 I8296 0.039I Fixed Effects VN C 83.94962 - PL C - !D C 26.05I I - ML C TL C 53.33689 98.34395 R-squared 0.954549 Mean dependent var 26.9312 Adjusted R-squared 0.932732 S.D dependent var 10.5036 S.E ofregression 2.724216 Sum squared resid 371.068 Log likelihood -166.379 F-statistic 55.2676 Durbin-Watson stat I 193056 Prob(F-statistic) 0.0000 I 1.75975 82 MODELE Dependent Variable: GDS? Method: Seemingly Unrelated Regression Sample: 1986 2000 Total panel (balanced) observations: 75 Variable Coefficient Std Error t-Statistic Pro b c 116.7498 11.32915 10.30526 0.0000 DEP? -117.3519 13.55912 -8.654829 0.0000 RIR? -0.052915 0.059114 -0.89514 0.3742 - VN GDP VN PL GDP PL -0.623907 0.392808 -1.588327 0.1173 0.623615 0.224749 2.774717 0.0073 10 GDP 10 0.725575 0.182686 3.971707 0.0002 - ML GDP ML -0.4 I 8366 0.116729 -3.584092 0.0007 - TL GDP- TL 0.053901 0.083052 0.649004 0.5187 VN M2 VN -0.435639 0.112673 -3.866391 0.0003 PL M2 PL -0.348347 0.045741 -7.61561 0.0000 10 M2 10 -0.439776 0.085215 -5.160801 0.0000 ML M2 ML 0.045971 0.031902 1.44099 0.1546 -0.289592 0.057338 -5.050612 0.0000 - - TL M2- TL Weighted Statistics Log likelihood -173.9667 Unweighted Statistics R-squared 0.89362 Mean dependent var 26.9312 Adjusted R-squared 0.87303 I S.D dependent var 10.5036 S.E of regression 3.742726 Sum squared resid 868.496 Durbin- Watson stat 0.902727 83 REFERENCES Arestis, P and Chick, V (eds) 1995 Finance, Development and Structural Change: Post- Keynesian Perspectives, Edward Elgar Publishing Limited, Aldershot Asian Development Bank Asian Development Outlook 2002 Economic Trends and Prospects in Developing Southeast Asia, Oxford University Press (China) Ltd, Hong Kong Attanasio, O.P, Picci, L and Scorcu, A 1999 'Saving, Growth and Investment: A Macroeconomic Analysis Using A Panel of Countries', in World Bank Saving Project, http://www world bank.org Bandiera, 0, Caprio, G, Honohan, P and Schiantarelli, F 1998 'Does Financial Reform Raise or Reduce Savings? in World Bank Saving Project, http://www.worldbank.org Ca~dens, M and Escobar, A 1997 Determinants of Savings in Columbia 1925-94, Banco Interamericano de Desarrollo, Washington Deaton, A 1992 Understanding Consumption, Clarendon Press, Oxford Deaton, A and Paxson, C 1998 'Saving and Growth: Another Look at the Cohort Evidence', in World Bank Saving Project, http://www.worldbank.org Dornbusch, R and Fischer, S 1990 Macroeconomics, McGraw-Hill Publishing Company, New York Edward, S 1996 'Why are Latin American Saving Rates so Low? 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