The effect of population ageing on savings: a time series analysis for Türkiye

Despite the theoretical debate on its impact on economic growth, saving is a key macroeconomic variable. This issue has received even more attention since the emergence of endogenous growth models, which argued that by holding technology constant, economic growth would be determined by a country's population growth rate and national saving rate. Later growth models have continued to include savings among the variables affecting economic growth. At this point, demographic change becomes important because household savings, which is an important component of national savings, will be directly affected by the ageing of the population. This relationship came to the fore in the mid-20th century with the emergence of two closely related theories linking the age of individuals to their saving and consumption behaviour: the life cycle hypothesis and the permanent income hypothesis. Both hypotheses assume that individuals seek to maximise their utility through a consumption profile consistent with their lifetime earnings. In Turkey, there has been a significant decline in fertility and mortality rates in recent years. Considering the rapid demographic transition that the country is going through, this study investigates the impact of population ageing on the overall saving volume. According to the findings obtained from the econometric analysis based on the Autoregressive distributed lag (ARDL) model, which includes a series of control variables such as income, interest rate and inflation as well as the amount of the elderly population, the aging of the population positively affects the volume of savings. Inflation and interest rate also have a positive effect on savings, but it is much weaker. Accordingly, it can be concluded that the life cycle hypothesis is not valid in Turkey.