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.