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Chinese Saving Dynamics: The Impact of GDP Growth and Dependent Share

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Author Info

  • Carl Bonham

    ()
    (UHERO, University of Hawaii at Manoa)

  • Calla Wiemer

    ()
    (US-China Institute, University of Southern California)

Abstract

China's national saving rate rose rapidly in the 2000s after declining through the late 1990s. These dynamics are not readily explained by the precautionary motive, the institutional distribution of income, or reform related processes in general. Rather, we find a compelling explanation lies with GDP growth fluctuations and demographic shifts. We estimate a vector autoregressive model for the period 1978-2008, then generate in-sample simulations that successfully replicate the 2000s run-up in the saving rate. Our out of sample forecasts show the saving rate dropping in the 2010s as the dependent share falls and GDP growth moderates.

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Bibliographic Info

Paper provided by University of Hawaii Economic Research Organization, University of Hawaii at Manoa in its series Working Papers with number 2010-11R.

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Length: 28 pages
Date of creation: 29 Jul 2010
Date of revision: 11 Jan 2012
Handle: RePEc:hae:wpaper:2010-11r

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Related research

Keywords: Chinese Saving Dynamics; GDP Growth; Dependent Share; Savings Rate;

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References

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  1. Charles Yuji Horioka & Junmin Wan, 2006. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," ISER Discussion Paper 0676, Institute of Social and Economic Research, Osaka University, revised Sep 2007.
  2. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
  3. Loayza, N. & Schmidt, K. & Serven, L., 1999. "What Drives Private Saving Across the World?," Papers 47, Cambridge - Risk, Information & Quantity Signals.
  4. Chad Zanocco, 2010. "Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(4), pages 1259-1261.
  5. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  6. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, July.
  7. Hans-Martin Krolzig, 2003. "General-to-Specific Model Selection Procedures for Structural Vector Autoregressions," Economics Series Working Papers 2003-W15, University of Oxford, Department of Economics.
  8. Guonan Ma & Zhou Haiwen, 2009. "China’s evolving external wealth and rising creditor position," BIS Working Papers 286, Bank for International Settlements.
  9. Guonan Ma & Wang Yi, 2010. "China’s High Saving Rate: Myth and Reality," Economie Internationale, CEPII research center, issue 122, pages 5-40.
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Cited by:
  1. Gu, Xinhua & Tam, Pui Sun, 2013. "The saving–growth–inequality triangle in China," Economic Modelling, Elsevier, vol. 33(C), pages 850-857.

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