The impact of saving rate on economic growth in Asian countries

Abstract

<abstract> <p>The success of East Asian countries in economic growth since the 1960s and the rapid development of China's economy in the past four decades have caused debates on whether these countries have found a new path of development and the role of government in economic growth. The present study investigates whether orthodox growth theories can explain East Asian growth by examining the impact of saving rates on economic growth in Asian countries. Using panel data analysis based on a dataset of 46 Asian countries and regions during the period 1969–2021, we find that gross domestic saving rate, GDP per capita, and urban population growth rate all significantly impact the annual GDP growth rates of Asian countries. The positive effect of the gross saving rate is very significant in the period 1960–1990 but insignificant in 1991–2021, while the positive impact of the urban population growth rate is more significant in the period 1991–2021 than in 1960–1990, and GDP per capita has a very significant negative effect during both 1960–1990 and 1991–2021. We further find that the saving rate has a very significant positive impact on economic growth in East and South Asian countries during 1960–2021. GDP per capita has a significant negative impact in East, South, Southeast, and West Asian countries; the urban population growth has a significant positive impact on GDP growth in East and West Asian countries during 1960–2021. The saving rate has a very significant positive impact on GDP growth in high-income countries, a significant positive impact in upper-middle-income countries, and an insignificant impact in lower-middle-income countries. Our present results show that a high saving rate is one of the critical factors for rapid economic growth in developing countries. Urban population growth and GDP per capita also have significant impacts on economic growth.</p> </abstract>