Working Paper: NBER ID: w22334
Authors: Jingting Fan; Sebnem Kalemliozcan
Abstract: One of the explanations for global imbalances is the self-financing behavior of credit-constrained firms in rapidly growing emerging markets. We use an extensive firm-level data set from several Asian countries during 2002–2011, and test the micro foundation of this theory by estimating the effect of an exogenous change in credit constraints, resulting from financial reforms, on firms’ saving behavior. As predicted, after financial reforms, firms who were credit-constrained previously decreased their savings more (or increased their savings less) relative to unconstrained firms. However, this firm-level effect did not lead to a decrease in aggregate corporate savings as conjectured by the theory. Our sector level regressions show that corporate savings increased after financial reforms, and more so for sectors more dependent on external finance. The current account surpluses also did not register a significant deterioration after financial reforms, consistent with our findings on sectoral and aggregate corporate savings
Keywords: financial reforms; corporate savings; global imbalances; credit constraints; emerging markets
JEL Codes: E22; F41; D24; O16; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial Reforms (G28) | Savings Behavior of Firms (D21) |
| Credit Constraints (E51) | Savings of Credit-Constrained Firms (D22) |
| Savings of Non-Constrained Firms (D22) | Aggregate Corporate Savings (E21) |
| Financial Reforms (G28) | Aggregate Corporate Savings (E21) |
| Savings Behavior of SOEs (E21) | Aggregate Corporate Savings (E21) |