Revisiting the effects of demographic dynamics on economic growth in Asia: a panel vector-autoregressive approach with a saving channel

This paper examines the effects of demographic dynamics on economic growth, with a focus on the working-age population and the saving rate in 17 Asian economies for the past and future periods of 1970–2018 and 2018–2050, respectively. The study applies a panel vector-autoregressive model, given the endogenous interactions among the variables. The main findings are as follows: first, the direct channel to economic growth is from the working-age population share and the indirect channel is through the saving rate; second, there is a feedback effect from economic growth to the saving rate; third, the contribution ratio of the population-bonus effect to economic growth for the 1970–2018 period was approximately 30 per cent on average, which was consistent with the ratios found in previous studies; and fourth, in the projections for 2018–2050, the magnitudes of the ‘population-onus’ effect in selected economies are very large (minus 1 or 2 per cent)—even greater than found in previous studies—which was due to the earlier onset of the ‘population onus’ with aging.