Demographic Determinants of Savings in ECOWAS

Abstract

Countries in ECOWAS had recorded low savings rate in the last three decades. Savings rate as a percentage of GDP in Mali and Sierra Leone were negative in the period considered in this study. Previous studies mainly focused on the determinants of savings in ECOWAS with little attention on the role of demographic structure. This paper examined the determinants of savings in ECOWAS and the importance of demographic structure in savings rate. Data on gross savings rate, per capita income, interest rate, inflation, financial aids, remittances and population age structure were collected for six ECOWAS countries namely, Cote d’ Ivoire, Ghana, Mali, Niger, Nigeria and Sierra Leone. The data spans from 1981 to 2014. The fixed effect least square dummy variable was used to analyze the data.  Per capita income and real interest rate were found to have statistically significant effect on savings rate. Young age dependency rate and working population rate showed negative effect on savings rate. Although the result of the working population age group is contrary to theory they provided important policy lessons. Economic policies should be directed towards increasing income of the working population age group to increase the saving rate in the region.