Demographic Change in Asia: the Impact on Optimal National Saving, Investment and the Current Account.

By simulating a model of the optimal level of saving in a small open economy, this paper calculates the levels of optimal national saving, investment and the current account balance for five Asian countries, Hong Kong, Japan, Singapore, Malaysia and Philippines, for the period from 1997 to 2050. The calculations focus on the implications of making allowance for the changing demographic structure of the population on employment participation, labour productivity and consumption demands. The simulations show that variations in prospective demographic change across countries cause considerable variations in the patterns of their optimal rates of national saving, reinforcing the idea that evaluations of a country's performance on saving should take account of the prospective demographic structure of its population.