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

Author

Listed:
  • 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.

Suggested Citation

  • Carl Bonham & Calla Wiemer, 2010. "Chinese Saving Dynamics: The Impact of GDP Growth and Dependent Share," Working Papers 2010-11R, University of Hawaii Economic Research Organization, University of Hawaii at Manoa, revised 11 Jan 2012.
  • Handle: RePEc:hae:wpaper:2010-11r
    as

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    File URL: http://www.uhero.hawaii.edu/assets/WP_2010-11Rev.pdf
    File Function: First version, 2010
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    References listed on IDEAS

    as
    1. 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.
    2. Charles Yuji Horioka & Junmin Wan, 2007. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 2077-2096, December.
    3. 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.
    4. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    5. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    6. Hans-Martin Krolzig, 2003. "General-to-Specific Model Selection Procedures for Structural Vector Autoregressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(s1), pages 769-801, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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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.

    More about this item

    Keywords

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

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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