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Population Ageing and FDI Inflows in Japan: ARDL Approach to Cointegration Analysis

Author

Listed:
  • Rajarshi Mitra

    (Tokyo International University, Japan)

  • Md. Thasinul Abedin

    (University of Chittagong, Bangladesh)

Abstract

The socio-economic effects of population ageing in industrialized nations have attracted the attention of academicians and policymakers worldwide. Although country-case studies on the determinants of FDI inflows are extensive, academic literature has neglected an empirical investigation of the direct effects of population ageing on FDI inflows in Japan. This is a unique study that applies Pesaran et. al.`s (2001) bounds testing approach to cointegration analysis and models the short-run and long-run effects of (a) an increase in the dependency ratio for the old (as a percentage of working age population), and (b) an increase in the number of individuals aged 65 and above (as a percentage of total population) on the net FDI inflows in Japan (as a percentage of GDP). In both bivariate and multivariate models, the short-run effects are statistically insignificant, but the long-run effects are significantly positive. Additionally, in both bivariate and multivariate analysis, the model with the number of individuals aged 65 and above (as a percentage of total population) indicates a faster speed of adjustment toward long-run equilibrium. We conclude that, while population ageing may have an insignificant effect on net FDI inflows in Japan (as a percentage of GDP) in the short-run, a significantly positive relationship between the two variables exists in the long-run.

Suggested Citation

  • Rajarshi Mitra & Md. Thasinul Abedin, 2020. "Population Ageing and FDI Inflows in Japan: ARDL Approach to Cointegration Analysis," Economics Bulletin, AccessEcon, vol. 40(2), pages 1814-1825.
    • Handle: RePEc:ebl:ecbull:eb-20-00350
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    References listed on IDEAS

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    Cited by:

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    3. Jeunghan Lee & Keuntae Cho, 2023. "Effects of Science, Technology, and Innovation Official Development Assistance on Foreign Direct Investment in Developing Countries," Sustainability, MDPI, vol. 15(16), pages 1-13, August.

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    More about this item

    Keywords

    FDI; Demography; Cointegration; Bounds Testing.;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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