Dependency Rate and Savings: The African Evidence with Panel Data

Abstract

This study examines the impact of the age dependency ratio on domestic savings rates. We test this issue for 16 African countries using annual panel data. The empirical analysis was conducted using the panel unit roots, panel cointegration and panel causality tests. The empirical findings indicate evidence of panel cointegration. Furthermore, results from panel causality analysis reveal that dependency ratio causes savings rate negatively. Overall, our findings support the view that changes in non-working population size are important in explaining the future path of domestic savings rates in Africa.

Analyzing the Impact of Foreign Capital Inflows on Domestic Savings in Pakistan: A Comprehensive Time Series Investigation

“…Hence, the negative coefficient of DEPR signifies a substantial and adverse long-term association between DEPR and GDS. Our results are consistent with the studies (Apergis and Christou, 2012;Keho, 2012 andGupta, 1975). The economic reason for the positive relationship between foreign direct investment and domestic savings is that more foreign direct investment will generate more economic activity.…”

Effect of Fiscal and Monetary Policy on Gross Domestic Savings in Kenya

“…This indicates that a 1% change in UNM causes 4.37% negative change in GDS. The results are consistent with the findings of Apergis and Christou (2012) and Samantaraya and Patra (2014). This resonates with the existing situation on the ground as higher unemployment rates depletes households incomes leading less savings with similar effect on the national savings (Matundura, 2021).…”

On the Causality Relationship between Demographic Changes, Economic Growth and Domestic Savings in Vietnam

“…Specifically, the potential for domestic savings is in the working age population and in the amount of accrued domestic savings that can be converted to resources for investment into the economic growth of the country. Apergis and Christou (2012) employed the cointegration and causality tests to investigate the relationship between dependency ratio, domestic savings rate (as the share of GDP) and real per capita income (GDP per capita) in sixteen African developing countries. The empirical results provided the evidence of the cointegration (long run) relationship between dependency ratio, domestic savings rate, and GDP per capita.…”

“…Indeed, economic growth is a powerful factor determining domestic savings rate in the long run. However, Apergis and Christou (2012) doubted the possibility of increasing domestic savings rate of the African countries since they were at an earlier stage of demographic transition due to a lower fertility rate, whereas the youth and elderly dependency ratios remained high as compared to other Asian countries. Keho (2012) also used a time series data from sixteen African developing countries and applied the cointegration and causality tests to examine the relationship between domestic savings as a share of GDP, dependency ratio and real GDP per capita.…”