IS ACFTA A PROPER STRATEGY OF SUSTAINABLE POVERTY ALLEVIATION?: PROOF FROM THE DEPLETION OF SAVING RATE
Keywords:
Free Trade, Poverty Alleviation, Saving Behavior
Abstract
The outcome of Regional Free Trade Area (R-FTA) still remains a conundrum. Regional free trade area (R-FTA) is one of the manifestations of the economy integration phenomenon. R-FTA brings many pros and cons to the economists. It allows better allocation of resources especially by eliminating tariffs, thus making people have higher purchasing power for goods. While the increase of purchasing power is good for growth engine and poverty alleviation progress, this paper proves that there is potency for the agreement to be detrimental in the long run.
The main focus in this paper is the potential impact of ACFTA to the saving rate as the shock buffer for the poor in time of recessions and crises, where purchasing power decreases significantly. We view the ACFTA impact through the series of net import, defined as the difference between imports from export. We use Dynamic Panel Data (DPD) to estimate the impact of net import to the saving rate, assuming that there is a dynamic relationship between saving rate and its lagged value. The estimation result proves that there is a negative relationship between import and the saving per capita, which indicates the consumptive behavior of ASEAN people under high import. Moreover, the dynamic relationship shows that saving per capita is not persistent, meaning that the saving rate will be decreased gradually.
Therefore, we can expect that in the long rung, the savings will be depleted into nothing if we keep letting the import flooded domestic market without imposing any pre-emptive and reactive policies. This paper provides a set of historical estimation of the potential impact of ACFTA on saving rate and its policy implication to endure the impact.
JEL Classification Code: E38, F15
Keywords: , , Saving Behavior
Downloads
Download data is not yet available.
References
AlFoul, Bassam Abu, 2010, “The Causal Relation between Savings dan Economic Growth: Some Evidence from MENA Countries”., diakses pada 13 Juli 2010.
Anoruo, E. dan Ahmad, Y., 2001, “Causal Relationship Between Domestic Savings and Economic Growth: Evidence from Seven African Countries”. African Development Bank, Vol. 13, Issue 2, pp. 238-249.
Attanasio, Orazio, James Banks, Costas Meghir, Guglielmo Weber, 1999, “Humps and Bumps in Lifetime Consumption”. Journal of Business & Economic Statistics,Vol. 17, hal. 22-35.
Azzopardi, Franco, 2004, “The Propensity to Save and Interest Rates”,, diakses pada 16 Juni 2010.
Balassa, Bela. “The Effects of Interest Rates on Savings in Developing Countries”. World Bank Working Paper Series,Vol. 55. 1989.
Bérubé, Gilles dan Denise Côté. “Long-Term Determinants of the Personal Savings Rate: Literature Review and Some Empirical Results for Canada”. Working Paper - Bank of Canada. 2000.
Birdsall, Nancy. “Why Low Inequality Spurs Growth: Savings And Investment By The Poor”. Inter-American Development Bank Working Paper, No. 327, 1996.
Brumberg, Richard E. “An Approximation to the Aggregate Saving Function”. Economic Journal, Vol. 66, hal. 66-72. 1956.
Carroll, Christopher D. and David N. Weil. “Saving and Growth: A Reinterpretation”. Working Paper Series, No. 4470. 1993.
Cebula, R. J. “Federal Government Budget Deficit and Interest Rates: A Note”. Public Choice. 1987.
Darrat, Ali F., 1988, “Have Large Budget Deficits Caused Rising Trade Deficits?”. Southern Economic Journal, Vol. 54, No. 4, hal. 879-887.
Davidson, Russell and James G. MacKinnon, 1982, “Inflation and the Savings Rate”. Queen’s Economics Department Working Paper, No. 493.
Deaton, Angus, 1977, “Involuntary Saving Through Unanticipated Inflation”. The American Economic Review, Vol. 67, No. 5, hal. 899-910.
Dusenberry, J.S., 1949, “Income, Saving, and the Theory of Consumer Behavior”. Cambridge, Mass.: Harvard University Press.
Edwards, Sebastian, 1995, “Why Are Savings Rate So Different Across Countries?: An International Comparative Analysis”. NBER Working Paper Series, No. 5097.
Friedman, Milton. 1957. “405.html”The Permanent Income Hypothesis”. NBER Chapters.
Gourinchas, Pierre-Olivier and Jonathan A. Parker, 2001, “The Empirical Importance on Precautionary Savings”. NBER Working Paper Series, No. 8017.
Gupta, Kanhaya L., 1971, “Dependency Rates and Savings Rates: Comment”. American Economic Review,Vol. 61, hal. 469-71.
Gylfason, Thorvaldur., 1993, “Optimal Saving, Interest Rates, and Endogenous Growth”. Journal of Economics,Vol. 95, hal. 517-533.
Harvey, Ross, 2004, “Comparison of Household Saving Ratios: Euro Area/United States/ Japan”. Paper of Organisation for Economic Co-operation and Development (OECD),No. 8, 2004.
Heer, B. and Suessmuth, B., 2006, “The Savings-Inflation Puzzle”. Cesifo Working Paper, No. 1645.
Higgins, Mathew and Jeffrey G. Williamson, 1996, “Asian Demography and Foreign Capital Dependence,” NBER Working Paper Series, No. 5097.
Higgins, Matthew, 1999, “Demography, National Saving, and International Capital Flows”, International Economic Review, Vol. V/39, hal. 343-69.
Hoelscher, G. P., 1983, “Federal Borrowing and Short-Term Interest Rates”. Southern Economic Journal, Vol. 50, hal. 319-33.
Horioka, Charles Yuji dan Junmin Wan., 2006, “The Determinants of Household Saving In China: A Dynamic Panel Analysis of Provincial Data”. NBER Working Paper Series, No. 12723.
Howard, David H., 1978, “Personal Saving Behavior and the Rate of Inflation”. The Review of Economics and Statistics, Vol. 60, No. 4, hal. 547-554.
Hufbauer, Gary Clade dan Yee Wong., 2005, “Prospects for Regional Free Trade in Asia”. Working Paper Series of Institute for International Economics,No. 05-12.
Huggett, Mark and Gustavo Ventura, 1995, “Understanding Why High Income Households Save More Than Low Income Households”. Discussion Paper Federal Reserve Bank of Minneapolis, No. 106.
Islam, M. Faizul, 1998, “Brazil’s Twin Deficits: An Empirical Examination”. Atlantic Economic Journal.
Japelli, T., dan Pagano, 1994, M. “Savings, Growth and Liquidity Constraints”. Quarterly Journal of Economics, Vol. 109, hal. 83-109.
Kendall, Patrick, 2000, “Interest Rates, Savings, and Growth in Guyana”. Paper of Caribbean Development Bank.
Kuznets, S., 1960, “Quantitative Aspects of the Economic Growth of Nations: Capital Formation Proportions”. Economic Development Cultural Change, Vol. 8, No. 4, Part II.
Krugman, Paul and Maurice Obstfeld, 2006, “International Economics: Theory and Policy”. 7th ed. Addison Wesley - Prentice Hall.
Labonte, Marc, 2003, “The Budget Deficit and the Trade Deficit: What Is Their Relationship?”. Congressional Report Service Report For Congress.
Leff, Nathaniel H., 1969, “Dependency Rates and Savings Rates”. The American Economic Review, Vol. 59, No. 5, hal. 886-896.
Lindh, Thomas., 1999, “Age Structure and Economic Policy: The Case of Saving and Growth”. Population Research and Policy Review, Vol. 18, , hal. 261-277.
Mankiw, N. Gregory, 2001, “Pengantar Ekonomi”. 2nd ed. Jakarta: Penerbit Erlangga.
Markusen, James R., James R. Melvin, William M. Kaempfer, and Keith Maskus, 1994, “International Trade: Theory and Evidence”. McGraw Hill.
Mikesell, Raymond F. and James E. Zinser, 1973, “The Nature of The Savings Function in Developing Countries: A Survey of the Theoretical and Empirical Literature”. Journal of Economic Literature, Vol. 11, No. 1, hal. 1-26.
Mishra, P.K, S. K. Mishra, and J. R. Das., 2010, “The Dynamics of Savings and Investment Relationship in India”. European Journal of Economics, Finance and Administrative Sciences, ISSN 1450-2887 Issue 18.
Modigliani, F. and Brumberg, R., 1954, “Utility Analysis and the Consumption Function: An Interpretation of Cross Section Data” in Kurihara K., ed. Post-Keynesian Economics. New Brunswick: Rutgers University Press.
Modigliani, Franco, 1970, “The Life Cycle Hypothesis of Saving and Intercountry Differences in the Saving Ratio,” in W. A. Eltis et al., eds., Induction, Growth and Trade, Oxford, hal. 197-225.
Mohan, Ramesh, 2006, “Causal Relationship Between Savings and Economic Growth in Countries With Different Income Levels”. Economics Bulletin, Vol. 5, No. 3 hal. 1_12.
Plosser, C. I., 1982, “Government Financing Decisions and Asset Returns”. Journal of Monetary Economics, Vol. 9, hal. 325-52.
Ram, Rati, 1983, “Dependency Rates and Aggregate Savings: A New International CrossSection Study”. The American Economic Review, Vol. 72, No. 3, hal. 537-544.
Rijckeghem, Caroline Van and Murat Üçer, 2009, “The Evolution and Determinants of The Turkish Private Saving Rate: What Lessons for Policy?”. ERF Research Report Series, No. 09-01. 2009.
Romer, David, 2001, “Advanced Macroeconomics”. 2nd ed. McGraw Hill, New York.
Romer, Paul M., 1986, “Increasing Returns and Long Run Growth”. Journal of Political Economy, Vol. 94, hal.1002-1037.
Rossi, Nicola, 1988, “Government Spending, the Real Interest Rate, and the Behavior of LiquidityConstrained Consumers in Developing Countries”. Staff Papers - International Monetary Fund, Vol. 35, No. 1, hal. 104-140.
Saltz, I.S., 1999, “An Examination of the Causal Relationship between Savings and Growth in the Third World,” Journal of Economics and Finance, Vol. 23, hal. 90-98.
Scholz, John Karl, Ananth Seshadri, and Surachai Khitatrakun, 2006, “Are Americans Saving ‘Optimally’ for Retirement”. Journal of Political Economy, Vol. 114(4), hal. 607-643.
Schultz, T. Paul., 2004, “Demographic Determinants of Savings: Estimating and Interpreting the Aggregate Association in Asia”. Paper Series of Economic Growth Centre - Yale University, No. 901.
Sinha, Dipendra, 1996, “Saving and Economic Growth In India”. MPRA Paper, No.18283, University Library of Munich, Germany.
Skinner, Jonathan, 2004, “Comment on ‘Aging and Housing Equity: Another Look in Perspectives on the Economics of Aging”. Chicago: The University of Chicago Press.
Solow,Robert M., 1956, “/viewitem.fcg/00335533/di951743/95p0039f/0?config=jstor&frame=frame&userID=81070d62@uh.edu/018dd5254c00502d8f04&dpi = 5”A Contribution to the Theory of Economic Growth.” Quarterly Journal of Economics, Vol. 70, hal. 65-94.
Song, Byung-Nak, 1981, “Empirical Research on Consumption Behavior: Evidence from Rich and Poor LDCs”. Economic Development and Cultural Change, Vol. 29, No. 3, hal. 597-611.
Todaro, Michael P. and Stephen C. Smith., 2008, “Economic Development”. Pearson Education Limited.
Wachtel, P. and J. Young., 1987, “Deficit Announcements and Interest Rates”. American Economic Review, Vol. 77, hal. 1007-12.
Yusuf, S. and R. Kyle Peters., 1984, “Savings Behavior and its Implications for Domestic Resource Mobilization: The Case of the Republic of Korea”. World Bank Staff Working Paper, No. 628.
Anoruo, E. dan Ahmad, Y., 2001, “Causal Relationship Between Domestic Savings and Economic Growth: Evidence from Seven African Countries”. African Development Bank, Vol. 13, Issue 2, pp. 238-249.
Attanasio, Orazio, James Banks, Costas Meghir, Guglielmo Weber, 1999, “Humps and Bumps in Lifetime Consumption”. Journal of Business & Economic Statistics,Vol. 17, hal. 22-35.
Azzopardi, Franco, 2004, “The Propensity to Save and Interest Rates”,
Balassa, Bela. “The Effects of Interest Rates on Savings in Developing Countries”. World Bank Working Paper Series,Vol. 55. 1989.
Bérubé, Gilles dan Denise Côté. “Long-Term Determinants of the Personal Savings Rate: Literature Review and Some Empirical Results for Canada”. Working Paper - Bank of Canada. 2000.
Birdsall, Nancy. “Why Low Inequality Spurs Growth: Savings And Investment By The Poor”. Inter-American Development Bank Working Paper, No. 327, 1996.
Brumberg, Richard E. “An Approximation to the Aggregate Saving Function”. Economic Journal, Vol. 66, hal. 66-72. 1956.
Carroll, Christopher D. and David N. Weil. “Saving and Growth: A Reinterpretation”. Working Paper Series, No. 4470. 1993.
Cebula, R. J. “Federal Government Budget Deficit and Interest Rates: A Note”. Public Choice. 1987.
Darrat, Ali F., 1988, “Have Large Budget Deficits Caused Rising Trade Deficits?”. Southern Economic Journal, Vol. 54, No. 4, hal. 879-887.
Davidson, Russell and James G. MacKinnon, 1982, “Inflation and the Savings Rate”. Queen’s Economics Department Working Paper, No. 493.
Deaton, Angus, 1977, “Involuntary Saving Through Unanticipated Inflation”. The American Economic Review, Vol. 67, No. 5, hal. 899-910.
Dusenberry, J.S., 1949, “Income, Saving, and the Theory of Consumer Behavior”. Cambridge, Mass.: Harvard University Press.
Edwards, Sebastian, 1995, “Why Are Savings Rate So Different Across Countries?: An International Comparative Analysis”. NBER Working Paper Series, No. 5097.
Friedman, Milton. 1957. “405.html”The Permanent Income Hypothesis”. NBER Chapters.
Gourinchas, Pierre-Olivier and Jonathan A. Parker, 2001, “The Empirical Importance on Precautionary Savings”. NBER Working Paper Series, No. 8017.
Gupta, Kanhaya L., 1971, “Dependency Rates and Savings Rates: Comment”. American Economic Review,Vol. 61, hal. 469-71.
Gylfason, Thorvaldur., 1993, “Optimal Saving, Interest Rates, and Endogenous Growth”. Journal of Economics,Vol. 95, hal. 517-533.
Harvey, Ross, 2004, “Comparison of Household Saving Ratios: Euro Area/United States/ Japan”. Paper of Organisation for Economic Co-operation and Development (OECD),No. 8, 2004.
Heer, B. and Suessmuth, B., 2006, “The Savings-Inflation Puzzle”. Cesifo Working Paper, No. 1645.
Higgins, Mathew and Jeffrey G. Williamson, 1996, “Asian Demography and Foreign Capital Dependence,” NBER Working Paper Series, No. 5097.
Higgins, Matthew, 1999, “Demography, National Saving, and International Capital Flows”, International Economic Review, Vol. V/39, hal. 343-69.
Hoelscher, G. P., 1983, “Federal Borrowing and Short-Term Interest Rates”. Southern Economic Journal, Vol. 50, hal. 319-33.
Horioka, Charles Yuji dan Junmin Wan., 2006, “The Determinants of Household Saving In China: A Dynamic Panel Analysis of Provincial Data”. NBER Working Paper Series, No. 12723.
Howard, David H., 1978, “Personal Saving Behavior and the Rate of Inflation”. The Review of Economics and Statistics, Vol. 60, No. 4, hal. 547-554.
Hufbauer, Gary Clade dan Yee Wong., 2005, “Prospects for Regional Free Trade in Asia”. Working Paper Series of Institute for International Economics,No. 05-12.
Huggett, Mark and Gustavo Ventura, 1995, “Understanding Why High Income Households Save More Than Low Income Households”. Discussion Paper Federal Reserve Bank of Minneapolis, No. 106.
Islam, M. Faizul, 1998, “Brazil’s Twin Deficits: An Empirical Examination”. Atlantic Economic Journal.
Japelli, T., dan Pagano, 1994, M. “Savings, Growth and Liquidity Constraints”. Quarterly Journal of Economics, Vol. 109, hal. 83-109.
Kendall, Patrick, 2000, “Interest Rates, Savings, and Growth in Guyana”. Paper of Caribbean Development Bank.
Kuznets, S., 1960, “Quantitative Aspects of the Economic Growth of Nations: Capital Formation Proportions”. Economic Development Cultural Change, Vol. 8, No. 4, Part II.
Krugman, Paul and Maurice Obstfeld, 2006, “International Economics: Theory and Policy”. 7th ed. Addison Wesley - Prentice Hall.
Labonte, Marc, 2003, “The Budget Deficit and the Trade Deficit: What Is Their Relationship?”. Congressional Report Service Report For Congress.
Leff, Nathaniel H., 1969, “Dependency Rates and Savings Rates”. The American Economic Review, Vol. 59, No. 5, hal. 886-896.
Lindh, Thomas., 1999, “Age Structure and Economic Policy: The Case of Saving and Growth”. Population Research and Policy Review, Vol. 18, , hal. 261-277.
Mankiw, N. Gregory, 2001, “Pengantar Ekonomi”. 2nd ed. Jakarta: Penerbit Erlangga.
Markusen, James R., James R. Melvin, William M. Kaempfer, and Keith Maskus, 1994, “International Trade: Theory and Evidence”. McGraw Hill.
Mikesell, Raymond F. and James E. Zinser, 1973, “The Nature of The Savings Function in Developing Countries: A Survey of the Theoretical and Empirical Literature”. Journal of Economic Literature, Vol. 11, No. 1, hal. 1-26.
Mishra, P.K, S. K. Mishra, and J. R. Das., 2010, “The Dynamics of Savings and Investment Relationship in India”. European Journal of Economics, Finance and Administrative Sciences, ISSN 1450-2887 Issue 18.
Modigliani, F. and Brumberg, R., 1954, “Utility Analysis and the Consumption Function: An Interpretation of Cross Section Data” in Kurihara K., ed. Post-Keynesian Economics. New Brunswick: Rutgers University Press.
Modigliani, Franco, 1970, “The Life Cycle Hypothesis of Saving and Intercountry Differences in the Saving Ratio,” in W. A. Eltis et al., eds., Induction, Growth and Trade, Oxford, hal. 197-225.
Mohan, Ramesh, 2006, “Causal Relationship Between Savings and Economic Growth in Countries With Different Income Levels”. Economics Bulletin, Vol. 5, No. 3 hal. 1_12.
Plosser, C. I., 1982, “Government Financing Decisions and Asset Returns”. Journal of Monetary Economics, Vol. 9, hal. 325-52.
Ram, Rati, 1983, “Dependency Rates and Aggregate Savings: A New International CrossSection Study”. The American Economic Review, Vol. 72, No. 3, hal. 537-544.
Rijckeghem, Caroline Van and Murat Üçer, 2009, “The Evolution and Determinants of The Turkish Private Saving Rate: What Lessons for Policy?”. ERF Research Report Series, No. 09-01. 2009.
Romer, David, 2001, “Advanced Macroeconomics”. 2nd ed. McGraw Hill, New York.
Romer, Paul M., 1986, “Increasing Returns and Long Run Growth”. Journal of Political Economy, Vol. 94, hal.1002-1037.
Rossi, Nicola, 1988, “Government Spending, the Real Interest Rate, and the Behavior of LiquidityConstrained Consumers in Developing Countries”. Staff Papers - International Monetary Fund, Vol. 35, No. 1, hal. 104-140.
Saltz, I.S., 1999, “An Examination of the Causal Relationship between Savings and Growth in the Third World,” Journal of Economics and Finance, Vol. 23, hal. 90-98.
Scholz, John Karl, Ananth Seshadri, and Surachai Khitatrakun, 2006, “Are Americans Saving ‘Optimally’ for Retirement”. Journal of Political Economy, Vol. 114(4), hal. 607-643.
Schultz, T. Paul., 2004, “Demographic Determinants of Savings: Estimating and Interpreting the Aggregate Association in Asia”. Paper Series of Economic Growth Centre - Yale University, No. 901.
Sinha, Dipendra, 1996, “Saving and Economic Growth In India”. MPRA Paper, No.18283, University Library of Munich, Germany.
Skinner, Jonathan, 2004, “Comment on ‘Aging and Housing Equity: Another Look in Perspectives on the Economics of Aging”. Chicago: The University of Chicago Press.
Solow,Robert M., 1956, “/viewitem.fcg/00335533/di951743/95p0039f/0?config=jstor&frame=frame&userID=81070d62@uh.edu/018dd5254c00502d8f04&dpi = 5”A Contribution to the Theory of Economic Growth.” Quarterly Journal of Economics, Vol. 70, hal. 65-94.
Song, Byung-Nak, 1981, “Empirical Research on Consumption Behavior: Evidence from Rich and Poor LDCs”. Economic Development and Cultural Change, Vol. 29, No. 3, hal. 597-611.
Todaro, Michael P. and Stephen C. Smith., 2008, “Economic Development”. Pearson Education Limited.
Wachtel, P. and J. Young., 1987, “Deficit Announcements and Interest Rates”. American Economic Review, Vol. 77, hal. 1007-12.
Yusuf, S. and R. Kyle Peters., 1984, “Savings Behavior and its Implications for Domestic Resource Mobilization: The Case of the Republic of Korea”. World Bank Staff Working Paper, No. 628.
Published
2010-11-22
How to Cite
Wirapati, B. A., & Kusumawardhani, N. A. (2010). IS ACFTA A PROPER STRATEGY OF SUSTAINABLE POVERTY ALLEVIATION?: PROOF FROM THE DEPLETION OF SAVING RATE. Buletin Ekonomi Moneter Dan Perbankan, 13(1), 75-102. https://doi.org/10.21098/bemp.v13i1.385
Issue
Section
Articles
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
