Open AccessExternal Resources and Savings Rate: A Pooled Mean Group Analysis for Developing Countries
Author(s) -
Anupam Das
Publication year - 2011
Publication title -
journal of economics and behavioral studies
Language(s) - English
Resource type - Journals
ISSN - 2220-6140
DOI - 10.22610/jebs.v3i1.255
Subject(s) - latin americans , developing country , recession , middle east , sample (material) , economics , panel data , east asia , investment (military) , business , international economics , development economics , economic growth , geography , macroeconomics , china , econometrics , political science , chemistry , archaeology , chromatography , politics , law
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.