Emergence of Asia: Reforms, Corporate Savings, and Global Imbalances

Jingting Fan, Sebnem Kalemli-Özcan

Research output: Contribution to journalReview article

1 Scopus citations

Abstract

One of the explanations for global imbalances is the self-financing behavior of credit-constrained firms in rapidly growing emerging markets. The paper uses an extensive firm-level data set from several Asian countries during 2002-11, and tests the micro foundation of this theory by estimating the effect of an exogenous change in credit constraints, resulting from financial reforms, on firms' saving behavior. As predicted, after financial reforms, firms who were credit constrained previously decreased their savings more (or increased their savings less) relative to unconstrained firms. However, this firm-level effect did not lead to a decrease in aggregate corporate savings as conjectured by the theory. The sector-level regressions show that corporate savings increased after financial reforms, and more so for sectors more dependent on external finance. The current account surpluses also did not register a significant deterioration after financial reforms, consistent with the paper's findings on sectoral and aggregate corporate savings.

Original languageEnglish (US)
Pages (from-to)239-267
Number of pages29
JournalIMF Economic Review
Volume64
Issue number2
DOIs
StatePublished - Jan 1 2016

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)

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