Population Ageing and FDI Inflows in Japan: ARDL Approach to Cointegration Analysis

Rajarshi Mitra () and Md. Thasinul Abedin ()
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Rajarshi Mitra: Tokyo International University, Japan
Md. Thasinul Abedin: University of Chittagong, Bangladesh

Economics Bulletin, 2020, vol. 40, issue 2, 1814-1825

Abstract: The socio-economic effects of population ageing in industrialized nations have attracted the attention of academicians and policymakers worldwide. Although country-case studies on the determinants of FDI inflows are extensive, academic literature has neglected an empirical investigation of the direct effects of population ageing on FDI inflows in Japan. This is a unique study that applies Pesaran et. al.`s (2001) bounds testing approach to cointegration analysis and models the short-run and long-run effects of (a) an increase in the dependency ratio for the old (as a percentage of working age population), and (b) an increase in the number of individuals aged 65 and above (as a percentage of total population) on the net FDI inflows in Japan (as a percentage of GDP). In both bivariate and multivariate models, the short-run effects are statistically insignificant, but the long-run effects are significantly positive. Additionally, in both bivariate and multivariate analysis, the model with the number of individuals aged 65 and above (as a percentage of total population) indicates a faster speed of adjustment toward long-run equilibrium. We conclude that, while population ageing may have an insignificant effect on net FDI inflows in Japan (as a percentage of GDP) in the short-run, a significantly positive relationship between the two variables exists in the long-run.

Keywords: FDI; Demography; Cointegration; Bounds Testing. (search for similar items in EconPapers)
JEL-codes: F4 (search for similar items in EconPapers)
Date: 2020-06-24
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Citations: View citations in EconPapers (5)

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