Long-run Determinants of Private Saving Behaviour in Pakistan

Compared to the rapidly-growing economies of Southeast Asia, the growth performance of the Pakistan economy was significantly weaker during the 1970s and 1980s. While the Southeast Asian countries made substantial progress in improving living standards, the average standard of living, as measured by the GNP per capita, was virtually stagnant in Pakistan over this period. Much of the difference in economic performance between Pakistan and the Southeast Asian countries is often attributed to the low rates of saving and investment in Pakistan.1 Indeed, the differences in rates of domestic investment are often attributed to the differences in rates of domestic saving. Hence, the disparity in the growth performance between Pakistan and the Southeast Asian countries over the past two decades relates to the differences in saving rates, and an understanding of the fundamental determinants of saving in Pakistan assumes critical importance. This paper reviews trend developments in the private saving behaviour in Pakistan, and compares these trends with those seen in the Southeast Asian economies during the period since 1970. Using co-integration analysis, the long-run properties of Pakistan’s saving rate are examined, with a view to identifying the main determinants of saving. The principal finding is that about one-half of the trend increase in saving appears to be related to financial development and deepening. In contrast to the results obtained by Faruqee and Husain (1994) and Husain (1995) for the Southeast Asian countries, demographics appear not to have played an important role in determining saving behaviour in Pakistan, possibly because high rates of population growth during the past three decades resulted in a virtually unchanged demographic structure of the population.

Private Saving and Its Determinants: The Case of Pakistan

Despite a gradual increase over the past twenty years, the rate of private saving in Pakistan remains low as compared with many of the developing economies in Asia. Empirical analysis of the long-run behaviour of saving in Pakistan suggests that financial deepening, though still at a relatively early stage of development, accounted for much of the rise in private saving. In contrast with the experience in the economies of Southeast Asia, where the demographic structure of the population changed significantly over the past two decades, high rates of population growth have kept the age structure of Pakistan’s population virtually unchanged and appear to account for the disparity between the saving rates in Pakistan and Southeast Asia. Hence, an increase in the long-run rate of private saving will likely require further financial development and a decline in the growth rate of the population.

Long-run Determinants of Private Saving Behaviour in Pakistan

Compared to the rapidly-growing economies of Southeast Asia, the growth performance of the Pakistan economy was significantly weaker during the 1970s and 1980s. While the Southeast Asian countries made substantial progress in improving living standards, the average standard of living, as measured by the GNP per capita, was virtually stagnant in Pakistan over this period. Much of the difference in economic performance between Pakistan and the Southeast Asian countries is often attributed to the low rates of saving and investment in Pakistan.1 Indeed, the differences in rates of domestic investment are often attributed to the differences in rates of domestic saving. Hence, the disparity in the growth performance between Pakistan and the Southeast Asian countries over the past two decades relates to the differences in saving rates, and an understanding of the fundamental determinants of saving in Pakistan assumes critical importance. This paper reviews trend developments in the private saving behaviour in Pakistan, and compares these trends with those seen in the Southeast Asian economies during the period since 1970. Using co-integration analysis, the long-run properties of Pakistan’s saving rate are examined, with a view to identifying the main determinants of saving. The principal finding is that about one-half of the trend increase in saving appears to be related to financial development and deepening. In contrast to the results obtained by Faruqee and Husain (1994) and Husain (1995) for the Southeast Asian countries, demographics appear not to have played an important role in determining saving behaviour in Pakistan, possibly because high rates of population growth during the past three decades resulted in a virtually unchanged demographic structure of the population

Private Saving and Its Determinants: The Case of Pakistan

Despite a gradual increase over the past twenty years, the rate of private saving in Pakistan remains low as compared with many of the developing economies in Asia. Empirical analysis of the long-run behaviour of saving in Pakistan suggests that financial deepening, though still at a relatively early stage of development, accounted for much of the rise in private saving. In contrast with the experience in the economies of Southeast Asia, where the demographic structure of the population changed significantly over the past two decades, high rates of population growth have kept the age structure of Pakistan’s population virtually unchanged and appear to account for the disparity between the saving rates in Pakistan and Southeast Asia. Hence, an increase in the long-run rate of private saving will likely require further financial development and a decline in the growth rate of the population

Centripetal Forces in China's Economic Takeoff

This paper uses provincial time series data from the People's Republic of China to empirically investigate two propositions relating to economic development: (i) that economic takeoff--or an acceleration in economic growth--is associated with inflows of foreign direct investment (FDI), possibly through technological transfer; and (ii) that takeoff is accompanied, at least in the short term, by widening income inequality. The results indicate that FDI flows have increased the rate of convergence in per capita incomes across China's provinces. However, the pattern of FDI, which has gone mainly to the relatively wealthy provinces, has caused different provinces to converge toward different steady states. . Copyright 2002, International Monetary Fund

Exchange Rate Regime Durability and Performance in Developing Countries Versus Advanced Economies

Drawing on new data and advances in exchange rate regimes' classification, we find that countries appear to benefit by having increasingly flexible exchange rate systems as they become richer and more financially developed. For developing countries with little exposure to international capital markets, pegs are notable for their durability and relatively low inflation. In contrast, for advanced economies, floats are distinctly more durable and also appear to be associated with higher growth. For emerging markets, our results parallel the Baxter and Stockman classic exchange regime neutrality result, though pegs are the least durable and expose countries to higher risk of crisis.

Economic reform and political risk in the GCC: implications for U.S. government and business

The following is a transcript of the eighty-fifth in a series of Capitol Hill conferences convened by the Middle East Policy Council. The meeting was held at the Russell Senate Office Building in Washington, DC, on July 12, 2016, with Richard J. Schmierer, chairman of the board of directors of the Middle East Policy Council, moderating, and Thomas R. Mattair, Council executive director, serving as discussant. The video can be accessed at www.mepc.org

Sovereign Debt Relief Schemes and Welfare

This paper shows that concerted debt reduction may be welfare-improving even when the investment disincentive effect of a debt overhang is not large enough to place the debtor country on the wrong side of the debt Laffer curve. Whether the appropriate relief scheme involves debt reduction or new money, however, depends on whether investment disincentives or liquidity constraints dominate. It is shown that, except under very special circumstances, mixed policy packages involving both debt and liquidity relief may not yield the desired results.Debt relief;Debt reduction;Economic models;debt, creditor, debt overhang, debtor country, repayment, debt obligations, external debt, consumption tax, debt crisis, debt burden, obligations, debt forgiveness, debtor countries, debtor government, sovereign debt, payments, restructuring, debt renegotiations, creditors, debt servicing, debt restructuring, debt buyback, indebted countries, debt negotiations, stock of debt, debt problems, heavily indebted countries, debtors, repurchases, repayment capacity, repayments, solvency, official creditors, net debt, relief package, market debt, sovereign debtors, taxes, interest, debt obligation, debt repayment, debt-equity, loans, external debt negotiations, debt exchange

To Peg or Not to Peg

This paper proposes a template for assessing whether or not a country''s economic and financial characteristics make it an appropriate candidate for a pegged exchange rate regime. The template employs quantifiable measures of attributes-trade orientation, financial integration, economic diversification, macroeconomic stabilization, credibility, and "fear-offloating" type effects-that have been identified in the literature as key potential determinants of regime choice. To illustrate, the template is applied to Kazakhstan and Pakistan. The results indicate a fairly strong case against a pegged regime in Pakistan. The implications for Kazakhstan are mixed, although changes in that economy in recent years strengthen the case against a peg.Exchange rate regimes;Currency pegs;exchange rate, exchange rate regime, terms of trade, trade flows, exchange rate flexibility, exchange rate changes, trading partner, commodity prices, economic integration, exchange rates, fixed exchange rate, exchange rate policy, balance of payments, exchange rate pass, aggregate demand, international trade, transactions costs, world price, trade gains, trade shocks, trade pattern, exchange rate variability, terms of trade shocks, currency areas, exchange rate shocks, trade partner, global markets, exchange rate system, effective exchange rate, world economy, fixed exchange rate regime, exchange rate stability, exchange rate peg, history of exchange rate, export price, nominal exchange rate, trading patterns, nominal exchange rate stability, domestic prices, oil imports, exchange arrangements, nominal effective exchange rate, foreign ownership, flexible exchange rate, international standards, stable exchange rate, external shocks, domestic price, external trade, exchange rate regime durability, foreign exchange, trade shock, world prices, potential trade gains, rigid exchange rate regimes, commodity exporters, low trade, exchange rate arrangements, import side, fixed exchange rates, export diversification, balance of payments crisis, de facto exchange rate regime