The Post‐Asian Crisis Drop in Investment: The Cases of Indonesia, Korea, Malaysia, and Thailand

21 Pages Posted: 9 May 2014

See all articles by Tai-Kuang Ho

Tai-Kuang Ho

National Chung Cheng University - Department of Economics

Kuo‐Chun Yeh

National Chung Cheng University - Department of Economics

Date Written: July 2014

Abstract

This study analyzes drops in East Asian investment and their determinants after the 1997–1998 Asian financial crisis. We first employ a random level‐shift autoregressive model to quantify the shift in investment ratios of four Asian economies hit by the 1997–1998 Asian financial crisis: Indonesia, Korea, Malaysia, and Thailand. We trace the major historical shifts in the levels of investment ratios and we find that the cumulated downward shifts in investment ratios during 1997–1998 for Indonesia, Korea, Malaysia, and Thailand are 6, 5, 14, and 14 percentage points, respectively. The investment ratios of most countries experienced several rebounds between 1999 and 2001, but the rebounds were too small to bring investment ratios back to their pre‐1990 levels. Having identified the episodes of investment shifts, the Bayesian Model Averaging (BMA) and several robust tests are employed to investigate the determinants of those level shifts in investment ratios. We find that real per capita gross domestic product growth and banking crises are the two most important factors contributing to shifts in the investment levels of these four crisis‐hit Asian economies. The results are useful in understanding the causes and remedies of global imbalances.

JEL Classification: C11, E22, F32, O53

Suggested Citation

Ho, Tai-Kuang and Yeh, Kuo‐Chun, The Post‐Asian Crisis Drop in Investment: The Cases of Indonesia, Korea, Malaysia, and Thailand (July 2014). Contemporary Economic Policy, Vol. 32, Issue 3, pp. 618-638, 2014, Available at SSRN: https://ssrn.com/abstract=2434876 or http://dx.doi.org/10.1111/coep.12034

Tai-Kuang Ho (Contact Author)

National Chung Cheng University - Department of Economics ( email )

Ming-Halung, Chia-Yi, 621
Taiwan
88 65 272 0411 (Phone)
88 65 272 0816 (Fax)

Kuo‐Chun Yeh

National Chung Cheng University - Department of Economics ( email )

Ming-Halung, Chia-Yi, 621
Taiwan

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