Document Type : Original Research


Graduate School of International Relations, Ritsumeikan University, Kyoto, Japan


This paper examines the impact of different categories of foreign capital inflows (FDI, Portfolio investment, and other investment) on domestic savings in 6 ASEAN countries, namely Indonesia, Malaysia, Philippines, Singapore, and Thailand, and Lao PDR. The study is conducted for two periods: 1990-2015, and 2000-2015 based on regression analyses utilizing Panel and Cross-section data of the selected ASEAN countries. The results show that foreign capital inflows at aggregate level displaces domestic savings. Of all categories of foreign capital inflows, only FDI has significantly positive impact on gross domestic savings rate in the two periods while short-term capital flows such as portfolio investment and other investment are not found to have any significant impact on domestic savings in the studied periods, and short-term capital flows show the increase in its volatile nature which is vulnerable to sustainable economic development. The results indicate the importance of trade liberalization, domestic financial development, and domestic investment to enhance domestic savings.


Adeniyi, o., & Egwaikhide, F. O. (2013). Saving-Investment nexus in developing countriees: Does financial development matter? Journal of Economic Development, 38, 119-140.
AFZAL, M. (2013). NATIONAL SAVINGS AND FOREIGN CAPITAL IN PAKISTAN. Applied Econometrics and International Development, 13(2), 201-210.
Agrawal, P., Sahoo, P., & Dash, R. K. (2009). Savings behavior in South Asia. Journal of Policy Modeling, 31, 208-224.
Aizenman, J., Pinto, B., & Radziwill, A. (2007). Source for Financing domestic capital: Is Foreign saving a viable option for developing countries? Journal of International Money and Finance, 26, 682-702.
Ang, J. (2011, September). SAVINGS MOBILIZATION, FINANCIAL DEVELOPMENT AND LIBERALIZATION: THE CASE OF MALAYSIA. Review of Income and Wealth, Series 57(3), 449-470.
Angmortey, B. N., & Offin, P. T. (2014, May). Does Foreign Capital Crowd–Out Domestic Saving in Developing Countries? An Empirical Investigation of Ghana. International Journal of Economics and Finance, 6(8), 161-172.
Boon, T. H. (2000, January). Savings, Investment and Capital Flows: An Empirical Studies on the ASEAN Economies. Universiti Putra Malaysia, Faculty of Economics and Management Working Paper, Working Paper 3. 2000. Retrieved from
Collins, S. (1991, January). Saving Behavior in Ten Developing Countries. In B. Bernheim, J. Shoven, B. Bernheim, & J. Shoven (Eds.), National Saving and Economic Performance (pp. 349 - 376). University of Chicago Press. Retrieved from
Delwar, H. (2014, June). Diffential impacts of foreign capital and remittance inflows on domestic savings in developing countries: A dynamic Heterogeneous Panel Analysis. Economic Record Journal, 90(Special Issue), 102-126.
Domar, E. (1946). Capital Expansion, Rate of Growth, and Employment. Econometrica, 14(2), 137-147.
Esfahani, H. (1991). Exports, Imports and Economic Growth in Semi-industrial Countries. Journal of Development Economics, 35, 93-116.
Harrod, H. F. (1939). An Essay in Dynamic Theory. The Economic Journal, 49(193), 14-33.
Horioka, C., & Terada-Hagiwara, A. (2012). The determinants and long-term projections of saving rates in Developing Asia. Japan and the World Economy, 24, 128-137.
Hyung, J. (2013, December). An Analysis on the Effect of Old Age Dependency Ratio on Domestic Saving Rate. University of California, Berkeley, Department of Economics.
Katircioglu, S. T., & naraliyeva, A. (2006). Foreign direct investment, domestic savings and economic growth in Kazakhstan: Evidence from Co-integration and Causality tests. Investment Management and Financial Innovations, 3(2), 34-45.
Kiong, W. H., & Jomo, K. (2005, February). Before the Storm: The Impact of Foreign Capital Inflows on the Malasian Economy, 1966-1996. Journal of the Asia and Pacific Economy, 10(1), 56-69.
Kramer, J., & Chen, J. (2010). Title of the Article. Journal Name, 110-313.
Krugman, P. (1997). The Age of Diminished Expectation. Cambrige MIT Press.
Mishra, D., Mody, A., & Murshid, A. P. (2001, June). Private Capital Flows and Growth. Finanance and Development, 38(2).
Montiel, P., & Reihart, C. (1999). Do capital controls and macroeconomic policies influence the volume and composition of capital flows? Evidence from the 1990s. Journal of International Money and Finance, 18, 619-635.
Ocampo, J. A., & Palma, J. G. (2008). The Role of Preventive Capital Account Regulations. José Antonio Ocampo and Joseph E. Stiglitz (eds.),Capital Market Liberalization and Development,, 170-204. New York: Oxford University Press.
Odhiambo, N. (2009). Savings and economic growth in South Africa: A multivariate Causality test. 31.
OHTA, H. (2015). The Effects of Internatioanl Capital Flows on Domestic Savings, Investment and growth: Faacts on 'F-H Puzzle' in OECD and Emerging Economies. Ritsumeikan Annual Review of International Studies, 14, 73-101.
Okafor, L. E., & Tyrowicz, J. (2010, September). Saving less when there is more foreign lending? Foreign debt and savings in developing countries. Journal of Economic Policy Reform, 13(3), 213-223.
Osoian, C., Lazar, L., & Zaharie, M. (2008). Determinants of Savings in Transition Economies (1986-2006). Transylvanian Review of Administrrative Sciences, 23E, 90-99.
Phimmavong, K. (2017, March). Impacts of foreign capital inflows on economic growth in 6 ASEAN countries: A panel data analysis.
Rand, J., & Tarp, F. (2002). Business Cycles in Developing Countries: Are They Different? World Development, 30(12), 2071-2088.
Sung, Y., & Young, S. (2005). What determines saving rates in Korea? The role of demography. Journal of Asian Economics, 16, 861-873.
Tapphavimol, K. (1984). The impact of foreign capital inflow on domestic savings in Thailand 1970-1984. ETD Collection for AUC Robert W. Woodruff Library, Paper 1830.
Watson, J., Taylor, A., Haffman, T., Jorge, A., Sulivan, B., Chung, D., & Mahmood, A. (2009). Title of the Book. New York: Publisher.
Weisskopf, T. (1972). The impact of foreign capital inflow on domestic savings in underderveloped countries. Journal of International Economics, 2(1), 25-38.