Bangladesh Bank Training Academy Journal

Abstract

Recent Studies in South and East Asian countries have shown that the impact of interest rate liberalization is either insignificant or significantly negative on private savings growth. However, the staggering growth of private savings in the run up of heated Asian Financial Crisis (AFC) followed by Global Financial Crisis(GFC), transformed South and East Asian region into a hub for large capital stock. Historically interest rate has always been a dominant factor in mobilizing the savings growth despite other macroeconomic juggernaut factors. This paper examines the role of interest rate liberalization on private savings in eleven Asian developing countries using panel data for the period 1980 to 2015. For Most of the South and East Asian countries the financial liberalization took place between 1980s and 1990s. However using system Staggered Diff in Diff approach, this paper concludes that there is no significant impact of interest rate liberalization on private savings growth within the specified time. Nevertheless, it was traced that interest rate liberalization significantly stimulated the Asian financial crisis further to drain out the capital from Asian region. Consequently negative economic outflow and positive trade flows took place during global financial crisis in the non shocked economies of Asian region while leaving the mark of casualties in shocked economies.