ABSTRACT
This chapter describes a long-run analysis on the savings-investment relationship based on the multivariate cointegration test. It examines the short-run dynamics of the relationship via vector error-correction modelling (VECM). The estimated short-run savings-investment causal relationships are then employed to analyze the international capital flows in the region. The chapter employs the annual data spanning from 1968 to 1997 of Gross Domestic Savings (GDS) and Gross Domestic Investment (GDI) of the five ASEAN countries collected from various issues of the central bank reports of the countries and the International Financial Statistics published by International Monetary Fund. It provides empirical evidences that the rapid economic growth, which had prolonged for about 8 years, sustained by productive activities. These activities were transformed, effectively, from the increased domestic resources and the mobilised international resources in the forms of foreign capital inflow and foreign direct investments.
