سرمایه گذاری خصوصی و سیاست های بخش مالی در هند و مالزی

This paper examines the role of financial sector policies in determining private investment in the economies of India and Malaysia. The results suggest that significant directed credit programs favoring certain priority sectors tend to discourage private capital formation in both countries. Interest rate controls appear to have a positive impact on private investment, with the effect being more pronounced in Malaysia. While high reserve and liquidity requirements exert a negative influence on private investment in India, the effect is found to be positive in Malaysia.

Although it is widely accepted that expansion of private investment is the main catalyst for generating long-run growth in developing countries, the response of private investment to various financial sector policies has received little attention in the analysis of investment behavior. An understanding of the way financial sector policies impact on private investment is important given that a number of developing countries have undergone significant financial sector reforms over the last few decades, leading to a widely observed increase in the degree of financial globalization. Drawing on the financial liberalization thesis of McKinnon, 1973 and Shaw, 1973, this study addresses the question of how government intervention in the financial system (including directed credit programs, interest rate controls, and reserve and liquidity requirements) affects the evolution of private investment in two rapidly growing developing economies – India and Malaysia. Understanding how each type of financial sector policy affects private investment provides some insight into the costs and benefits associated with each component of financial reform. This study is related to several strands of literature. One has explored the determinants of private investment for developing countries (e.g., Greene and Villanueva, 1991, Guimaraes and Unteroberdoerster, 2006, Jongwanich and Kohpaiboon, 2008, Kinkyo, 2007 and Serven, 2003). Another strand has attempted to examine the impact of financial sector reform on macroeconomic variables such as saving, investment, or financial deepening in developing economies (e.g., Ang, 2008, Ang, 2009, Ang and McKibbin, 2007, Bandiera et al., 2000 and Hermes and Lensink, 2005). Our work is also similar in some respects to that of Emran, Shilpi, and Alam (2007), who assess the effects of financial liberalization on the price responsiveness of private investment in India. Their results indicate that private investment has become more sensitive to changes in the cost of capital after liberalization. However, our focus, unlike theirs, is on the role of financial sector policies in determining private investment activity. This paper aims to complement the above studies, and to enrich the literature by providing further evidence on how financial sector policies affect the evolution of private investment, drawing on the experience of two leading developing economies that have undergone significant financial sector reforms. We focus on just two economies instead of a larger sample given that the effects of financial sector policies may be heterogeneous across countries at different stages of economic development. Case studies are particularly useful in disentangling the complexity of the financial environments and economic histories of each country. By analyzing case studies, the econometric findings of this project can be related to the prevailing institutional structure, thus informing both academic and policy debate. Several interesting features emerge from a comparative analysis of India and Malaysia. Firstly, both are high growth developing economies with British common law origins. Secondly, Malaysia was one of several economies severely impacted by the 1997–98 Asian financial crisis while India was largely unaffected by this episode of financial turbulence. In Malaysia’s case there has been a sharp decline in gross domestic investment following the 1997–98 crisis. This emanated predominantly from the private sector whereas public investment has been boosted significantly as part of the crisis management program. However, it is not clear whether such government’s pump-priming efforts will be sustainable in the long run. Consequently, this disappointing trend in private investment has become a major focus of economic policy debate in the crisis-affected Asian countries (see, e.g., Guimaraes and Unteroberdoerster, 2006 and Kinkyo, 2007). In the case of financial sector reforms, Malaysia initiated a series of financial liberalization programs in 1978 whereas India launched its reforms much later, in 1991. Surprisingly, the financial liberalization paths pursued in each country are remarkably similar despite their different starting points. Both countries have followed the conventional recommendations of a gradual reform approach for interest rate liberalization and reductions in reserve and liquidity requirements. However, quite apart from these measures, significant directed credit controls favoring certain priority sectors in the economies have remained in force in both countries. Notwithstanding their financial systems remaining partially restricted, India and Malaysia have achieved significant improvements in their financial sector development. In India, the ratio of private credit to GDP has increased from just 9% in 1960 to 45% in 2005. During the same period, this indicator increased significantly from just 7% to 117% in Malaysia (IMF, 2007). Finally, both India and Malaysia have relatively good databases by the standards of developing countries, providing an added incentive for this research. The remainder of the paper is structured as follows. The next section describes the financial repression and liberalization experience of India and Malaysia. Section 3 discusses the private investment function derived from the neoclassical framework. This conventional framework is then modified to provide an alternative specification by incorporating the role of financial sector policies into the private investment equation. Section 4 sets out the empirical model and explains the construction of variables. A cost minimization approach is adopted in Section 5 to introduce dynamics into the model. This dynamic private investment function is then estimated using the appropriate time series techniques in order to provide an analysis of the short-run dynamics as well as the long-run relationship between private investment and its determinants. Section 6 presents and analyzes the econometric estimates of the private investment function covering the period 1950–2005 for India, and 1959–2005 for Malaysia. Finally, we summarize the main findings and conclude.

Many developing countries have reformed their financial systems over the last few decades. While an increased level of financial integration has generally been observed across the world, how financial reform policies impact on private investment remains relatively unknown. Against this backdrop, this paper attempts to assess the effects of several types of financial sector policies, including directed credit programs, interest rate controls, and reserve and liquidity requirements, on the evolution of private investment. The private investment model is tested based on the experience of two fast growing developing economies whose rich histories in financial sector reforms provide ideal grounds for further analysis. We examined the determinants of real private investment in an autoregressive distributed lag framework, paying particular attention to testing for a long-run cointegrating relationship between the variables under consideration. Employing the ARDL bounds and the ECM cointegration techniques, the empirical evidence showed a significant steady-state relationship between private investment and its determinants. After documenting these basic cointegration results, we derived the long-run estimates using several estimators. The key qualitative aspects of the results are fairly insensitive to the choice of estimators. The results suggest that financial repressionist policies, in the form of significant directed credit controls, appear to have retarded private investment in both India and Malaysia. However, contrary to the financial liberalization thesis, interest rate restraints appear to be an effective device in stimulating private investment in both countries. While high reserve and liquidity requirements tend to have an undesirable effect on private investment in India, they are found to be favorable in Malaysia. Overall, the results for India seem to provide more support for the financial liberalization thesis. On the contrary, the results for Malaysia tend to provide more support for the financial repressionist ideology. As highlighted by Honohan and Stiglitz (2001), financial restraints are more likely to work well in environments with strong regulatory capacity. This is consistent with the observation that Malaysia has lower corruption and better law and order compared to India. In sum, our results tend to support the proposition that some form of financial restraint may stimulate private investment. The study highlights that since financial sector policies may have different effects on private investment, it is important to consider each component of financial sector reform separately in the analysis of investment behavior.