Saving, investment and international capital mobility in East Asia

This paper estimates the degree of international capital mobility in East Asia using the saving-investment correlation originated in Feldstein and Horioka [Feldstein, M., Horioka, C., 1980. Domestic saving and international capital flows. Economic Journal 90, 314-329]. We apply the empirical method used in Kim [Kim, S.H., 2001. The saving-investment correlation puzzle is still a puzzle. Journal of International Money and Finance 20, 1017-1034] to control for cyclical effects in estimating a time-series saving-investment correlation of 10 Asian countries from 1980 to 2002. Our conclusion is that the saving-investment correlation in East Asia steadily decreases over time but is still higher than that of the OECD countries over all studied periods. These results are consistent with the fact that capital mobility in East Asia is lower than that in the OECD countries. In addition, regional saving and investment data demonstrate that investment in East Asia is largely financed by regional savings.