Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 150: Life cycles, oil cycles, or financial reforms? The growth in private savings rates in Indonesia.

Sara Johansson
Additional contact information
Sara Johansson: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden

Abstract: What goes steady with private savings? This paper investigates reasons for the sustained growth in private savings in Indonesia since 1970, in a period characterized by economic growth, demographic changes, terms of trade movements, and financial liberalization. The main finding is that predictions from a simple life cycle model do well inasmuch as the remarkable growth in private savings rates is associated with a fall in the dependency ratio. This suggests that a reduction in the number of children relative to working age population has alleviated household budget constraints, thereby boosting savings rates.

Keywords: private savings; dependency ratio

JEL-codes: E21; O53; N35

32 pages, December 1996

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