The impact of foreign capital inflow on domestic savings in Thailand 1970-1984

• Main Author: Tapphavimol, Kornkanok
• Format: Others
• Published: DigitalCommons@Robert W. Woodruff Library, Atlanta University Center 1986
• Subjects: Economics
• Online Access: http://digitalcommons.auctr.edu/dissertations/1830; http://digitalcommons.auctr.edu/cgi/viewcontent.cgi?article=3411&context=dissertations

For the last two decades, foreign capital was considered as one of the most important factors in Thailand because of an attempt to raise the level of economic growth. After 1962, domestic savings were not adequate for the accumulation of capital, which allowed foreign capital to flow into the country in many forms, i.e., foreign aid, foreign private investment and other capital inflows. Economists had argued that effects of foreign capital inflows would either increase or decrease the economic development in Thailand. The objective of this study is to estimate the impact of foreign capital inflows on the level of domestic savings. The disaggregated foreign capital inflows are in three parts: 1) foreign aid (AID); 2) foreign private investment (FPI): and 3) other capital inflows (RFI), and used time-series data in Thailand between 1970 and 1984. By using the two-stages least square approach, results show that both foreign aid and foreign private investment have inverse relationships to both domestic savings and growth rate of GNP. In effect, one can conclude that an increase in foreign capital inflow leads to a decrease in domestic savings. But for the overall economy, foreign capital still is the important factor in order to increase employment, technology and other things.