Author

  • Anupam Das

    • Department of Policy Studies, Mount Royal University, 4825 Mount Royal Gate SW, Calgary, Alberta Canada T3E 6K6
    • Canada

Abstract

To examine the effect of external resources on savings dynamics, this paper employs the pooled mean group (PMG) technique to a large sample of 65 developing countries over the period of 1970 to 2009. The panel results for all the countries together suggest that approximately 33% of domestic savings are displaced by the inflow of external resources. Similar results are also found when regional panels (SubSaharan Africa, Asia and the Pacific, and Latin America and the Caribbean) are estimated. Additionally, foreign aid is found to have a stronger effect on domestic savings than private financial flows. All types of external flows are insignificant in determining the savings ratio in the Middle East and North Africa. These results have important implications for developing countries, in particular during the period of global recession. Specific attention to these results is necessary in developing countries to ensure a successful mobilization of domestic resources to support existing investment projects and other development programs.

Keywords

References

  • Asterious, D. (2009). Foreign Aid and Economic Growth: New Evidence from a Panel Data Approach for Five South Asian Countries. Journal of Policy Modeling, 31(1), 155-161.
  • Bosworth, B. P. & Collins, S. M. (1999). Capital Flows to Developing Economies: Implications for Saving and Investment. Brookings Papers on Economic Activity, 30(1), 143-180.
  • Chenery, H. B. & Strout, A. M. (1966). Foreign Assistance and Economic Development. American Economic Review, 56(4) , 679-733.
  • Dabla-Noris, E., Honda, J., Lahreche, A. & Verdier, G. (2010). FDI Flows to Low-Income Countries: Global Drivers and Growth Implications. IMF Working Paper, 132 . Available at: http://www.imf.org/external/pubs/ft/wp/2010/wp10132.pdf
  • Das, A. (2010). Three Essays on Non-Market Financial Flows to Developing Countries. PhD Dissertation, University of Manitoba. Available at: http://mspace.lib.umanitoba.ca/handle/1993/3895.
  • Doucouliagos, H. & Paldam, M. (2006). Aid Effectiveness on Accumulation: A Meta Study, Kyklos, 59(2), 227254.
  • Eichengreen, B. (2010). The Great Recession and the Great Depression: Reflections and Lessons, Economia Chilena, 13(2), 5-10.
  • Friedman, M. (1957). A Theory of the Consumption Function, Princeton University Press.
  • Griffin, K. B. (1970). Foreign Capital, Domestic Savings and Economic Development. Bulletin of the Oxford University Institute of Economics and Statistics, 32(2), 99-112.
  • Griffin, K. B. & Enos, J. L. (1970). Foreign Assistance: Objectives and Consequences. Economic Development and Cultural Change, 18(3), 313-327.
  • Griffith-Jones, S. & Ocampo, J. A. (2009). The Financial Crisis and its Impact on Developing Countries. Working Paper, 53 , International Policy Centre for Inclusive Growth. Available at: http://ocw.uc3m.es/periodismo/IPCWorkingPaper53.pdf
  • Hadri, K. (2000). Testing for Stationarity in Heterogeneous Panel Data. The Econometrics Journal, 3(2), 148161.
  • Hansen, H. & Tarp, F. (2000). Aid Effectiveness Disputed. Journal of International Development, 12(3), 375398.
  • Lin, J. Y. (2011). Lessons from the Great Recession, in Birdsall, N. and Fukuyama, F. (eds.) New Ideas on Development after the Financial Crisis. Baltimore: The Johns Hopkins University Press.
  • Majid, N. (2009). The Global Recession and Developing Countries. Employment Working Paper , 40 , Employment Sector, International Labour Office. Available at: http://ideas.repec.org/p/ilo/emwpap/2009-40.html.
  • Modigliani, F. & Brumberg, R. H. (1954). Utility Analysis and the Consumption Function: an Interpretation of Cross-section Data, in K. Kurihara (ed.), Post Keynesian Economics , London: George Allen and Unwin.
  • Mody, A. & Murshid, A. P. (2005). Growing Up with Capital Flows. Journal of International Economics, 65(1), 249-266 .
  • Ogaki, M., Ostry, J. E. & Reinhart, C. (1996). Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis. Economic Development and Cultural Change, 42(3), 573-596.
  • Okafor, L. M. & Tyrowicz, J. (2010). Saving Less when there is More? Foreign Debt and Savings in Developing Countries. Journal of Economic Policy Reform, 13(3), 213-223.
  • Papanek, G. F. (1972). The Effect of Aid and Other Resource Transfers on Savings and Growth in Less Developed Countries. The Economic Journal, 82(327), 934-950.
  • Pesaran, M. H., Shin, Y. & Smith, R. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446), 621-634.
  • Rahman, A. (1967). The Welfare Economics of Foreign Aid. Pakistan Development Review, 7(2), 141-159.
  • Roxburgh, C., Lund, S., Atkins, C., Belot, S., Hu, W. W. & Pierce, M. S. (2009). Global Capital Markets: Entering a New Era. Washington, DC: McKinsey & Company. Available at: http://www.mckinsey.com/009.pdf
  • Schmidt-Hebbel, K. & Servén, L. (1997). Saving Across the World: Puzzles and Policies. World Bank Discussion Paper, 354.
  • Serieux, J. (2011). Aid and Resource Mobilization in Sub-Saharan Africa: The Role of Reverse Flows? Working Paper, University of Manitoba.
  • Serieux, J. (2009). Aid and Savings in Sub-Saharan Africa: Should We Worry about Rising Aid Levels? Working Paper, 50, International Policy Centre for Inclusive Growth. Available at: http://www.ipcundp.org/pub/IPCWorkingPaper50.pdf
  • Weisskopf, T. E. (1972). The Impact of Foreign Capital Inflow on Domestic Savings in Underdeveloped Countries. Journal of International Economics, 2(1) , 25-38.

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Das, A. (2011). External Resources and Savings Rate: A Pooled Mean Group Analysis for Developing Countries. Journal of Economics and Behavioral Studies, 3(1), 51-62. https://doi.org/10.22610/jebs.v3i1.255

Share this article

License

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 3 No. 1 (2011) Growth, Governance & Service Delivery View issue contents

Published

2011-07-15

Submissions

Have research to publish? Journal of Economics and Behavioral Studies welcomes submissions.

Make a Submission