The Economic and Demographic Determinants of Savings in East Asia: GMM-System Approach

Abstract

Private saving rates which are the main source of investment are low not only in some emerging economies but also in industrialized countries for which it is essential and crucial to analyze the determinants of saving behavior in some of these countries. On the other hand, East Asian countries? success -particularly developing ones- is striking in terms of high saving rates. The aim of the present study is to analyse the determinants of private savings in East Asian countries that have higher rates among the other regions. In this regard, a private saving model is estimated by using Panel data analysis method that dynamic panel data analysis is specifically and differently employed. In accordance with this purpose and in line with Life Cycle Income Hypothesis, GDP growth rate, real interest rate and age dependency rate are taken into consideration as the determinants of saving behavior. Apart from these variables, other economic and demographic factors are also supposed to determine savings and included in the estimated model through which the study is more extensive than the earlier ones. According to the estimated model which is the most similar to standart life cycle model, growth and one lagged value of private saving have a positive impact on saving while dependency rate, real interest rate and government saving have a negative impact.