Population Ageing and Saving Rates in China, Japan and Korea: A Panel Granger Causality Analysis

Abstract

The world is ageing fast and East Asia is not an exception. Among the three major East Asian countries, Japan features the eldest society in the world, while China and Korea also witness a dramatic demographic transformation. One important impact of population ageing is on saving rates. In this paper we seek to investigate the causal relationship between demographics and savings in those three countries by employing a panel of data-set and innovative econometric technique – panel Granger causality test. On balance there is evidence supporting the argument that a growing younger population causes an increase in national saving, albeit not necessarily in household saving. The results are robust against different estimation procedures and parameters.

Key Words:

• Saving rate
• population ageing
• Granger causality
• East Asia

Jel Classification:

• E21
• J11
• N35

Acknowledgements

I would like extend my great gratitude to the anonymous referees for their kind and useful comments; however, any remaining errors if any are my own.