Dynamics of Asian Savings: The Role of Growth and Age Structure

Growth and demography, two important determinants of the savings rate in the life-cycle approach, are shown to explain much of the diversity in savings behavior in Asia across eight countries and over time. Inflation and adverse movements in the terms of trade are two additional factors that depress the propensity to save. The paper also finds evidence in favor of the error-correction formulation, under which the savings rate varies procyclically in the short run but remains constant in the steady state.