Analyzing the Effect of Changing Age Distribution on National Saving

The effect of the changing age distribution on national saving is estimated empirically in this paper. We have specified a saving function based on Ando – Modigliani’s Life Cycle Hypothesis which incorporates the portion of population in 11 different age groups to represent the age structure of the population. Auto_ Regressive Distributed Lag (ARDL) Model estimation technique is based derived from the ARDL model. An Error Correction Model (ECM) of national saving behavior in also constructed and estimated in order to reveal the short run dynamic adjustments of saving towards its long run equilibrium. Data used in the estimation process are time series data within the period 1345 and 1383. Data are tested for stationary and co-integration estimation technique in used for estimating the coefficients of the model. The results indicate that the age distribution in an influential factor an saving behavior of the population. A relative population increase in the age group of 15-24 and 55- and over, tends to lower national saving, while a relative increase in population within the age group of 25-29, 30-34, … and 50-54 has a positive impact on national saving. These in the age group of 35-39 and 40-44 have the highest saving rate.