The Impact of Per Capita Income on Savings

Oct 13, 2025 by wbrum.org 110 views

Introduction

Indonesia, a developing country, continues to strive to increase the level of national savings. Understanding how economic factors affect community saving behavior is crucial in developing effective policies to encourage savings. This study analyzes time series data from 1991 to 2020, using the Error Correction Model (ECM) approach, to identify the factors that affect the number of savings in Indonesia.

Factors Affecting the Number of Savings in Indonesia

Several factors are believed to affect the number of savings in Indonesia, including:

Per Capita Income

The Impact of Per Capita Income on Savings

The results of this study show that per capita income has a positive influence on the amount of savings in Indonesia, both in the short and long term. However, this influence is not statistically significant. That is, an increase in per capita income does encourage people to save more, but the effect is not strong enough to be considered a major determinant factor.

In the short term, an increase in per capita income may lead to an increase in savings, as people have more disposable income to allocate towards savings. However, in the long term, the effect of per capita income on savings may be offset by other factors, such as changes in interest rates and inflation.

Interest Rates

The Impact of Interest Rates on Savings

Variable interest rates show negative and significant effects on the number of savings in Indonesia. Both in the short and long term, an increase in interest rates tends to reduce the amount of savings. This shows that Indonesian people tend to be more responsive to changes in interest rates and prefer to save when interest rates are low.

In the short term, an increase in interest rates may lead to a decrease in savings, as people may choose to invest in other assets that offer higher returns. In the long term, the effect of interest rates on savings may be more pronounced, as people may adjust their savings behavior in response to changes in interest rates.

Inflation

The Impact of Inflation on Savings

Inflation has a positive influence on the amount of savings in Indonesia, although not statistically significant. This indicates that people tend to save more when the level of inflation is high, as an effort to protect the real value of their assets from erosion due to inflation.

In the short term, an increase in inflation may lead to an increase in savings, as people may choose to save more to protect their purchasing power. However, in the long term, the effect of inflation on savings may be offset by other factors, such as changes in interest rates and per capita income.

Dependency Ratio

The Impact of Dependency Ratio on Savings

Dependency ratio, which measures the proportion of unproductive population (children and elderly) on productive populations, shows negative effects on the amount of savings in the short term, but significantly in the long run. That is, in the short term, an increase in dependency ratio does not significantly affect the amount of savings. However, in the long run, an increase in dependency ratio tends to reduce the amount of savings, because the community needs to allocate more resources to meet the needs of non-productive groups.

In the short term, an increase in dependency ratio may not significantly affect savings, as people may not yet have to allocate resources to meet the needs of non-productive groups. However, in the long term, the effect of dependency ratio on savings may be more pronounced, as people may adjust their savings behavior in response to changes in the dependency ratio.

Conclusion

This study shows that although there are several factors that affect the number of savings in Indonesia, there are still many independent variables that do not have a significant influence on the amount of savings in Indonesia, based on the calculation of long-term and short-term estimates. These findings open up opportunities for further research that can identify other factors that can encourage an increase in the amount of savings in Indonesia.

Recommendation

Based on the results of this study, several recommendations can be submitted to encourage an increase in the amount of savings in Indonesia:

Increasing Education and Financial Literacy

Increasing financial education and literacy for the community can help them understand the importance of saving and managing finances well. This can be achieved through various channels, such as schools, community centers, and online platforms.

Strengthening the Social Security System

Improvement of the Social Security System can provide a sense of security for the community, so that they can focus more on saving for the future. This can be achieved through various measures, such as increasing the coverage of social security programs, improving the efficiency of social security administration, and increasing the benefits provided by social security programs.

Increasing Access to Financial Products and Services

Expansion of access to financial products and services, especially for people in remote areas, can help them to save more easily. This can be achieved through various measures, such as increasing the number of financial institutions in remote areas, improving the accessibility of financial products and services, and reducing the costs associated with accessing financial products and services.

Building Trust in Financial Institutions

Trust in financial institutions is an important factor in encouraging the community to save. This can be achieved through various measures, such as improving the transparency and accountability of financial institutions, increasing the confidence of the community in financial institutions, and reducing the risks associated with saving in financial institutions.

By implementing the right strategy, it is hoped that the amount of savings in Indonesia can increase significantly, so that it can support sustainable economic growth and improve the welfare of the community.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study uses secondary data, which may not be comprehensive or up-to-date. Secondly, the study uses a single econometric model, which may not capture the complexity of the relationships between the variables. Finally, the study does not consider the impact of other factors, such as government policies and external shocks, on the amount of savings in Indonesia.

Future Research Directions

This study opens up several opportunities for future research. Firstly, further research can be conducted to identify other factors that affect the amount of savings in Indonesia. Secondly, further research can be conducted to examine the impact of government policies and external shocks on the amount of savings in Indonesia. Finally, further research can be conducted to evaluate the effectiveness of the recommendations made in this study.

Conclusion

In conclusion, this study provides a comprehensive analysis of the factors that affect the number of savings in Indonesia. The study shows that per capita income, interest rates, inflation, and dependency ratio are all significant factors that affect the amount of savings in Indonesia. The study also provides several recommendations to encourage an increase in the amount of savings in Indonesia, including increasing education and financial literacy, strengthening the Social Security System, increasing access to financial products and services, and building trust in financial institutions. By implementing the right strategy, it is hoped that the amount of savings in Indonesia can increase significantly, so that it can support sustainable economic growth and improve the welfare of the community.

Introduction

The analysis of factors affecting the number of savings in Indonesia is a complex and multifaceted topic. In this article, we will address some of the frequently asked questions (FAQs) related to this topic.

Q: What are the main factors that affect the number of savings in Indonesia?

A: The main factors that affect the number of savings in Indonesia are per capita income, interest rates, inflation, and dependency ratio. These factors have a significant impact on the amount of savings in Indonesia, both in the short and long term.

Q: How does per capita income affect the number of savings in Indonesia?

A: Per capita income has a positive influence on the amount of savings in Indonesia, both in the short and long term. However, this influence is not statistically significant. That is, an increase in per capita income does encourage people to save more, but the effect is not strong enough to be considered a major determinant factor.

Q: How does interest rate affect the number of savings in Indonesia?

A: Variable interest rates show negative and significant effects on the number of savings in Indonesia. Both in the short and long term, an increase in interest rates tends to reduce the amount of savings. This shows that Indonesian people tend to be more responsive to changes in interest rates and prefer to save when interest rates are low.

Q: How does inflation affect the number of savings in Indonesia?

A: Inflation has a positive influence on the amount of savings in Indonesia, although not statistically significant. This indicates that people tend to save more when the level of inflation is high, as an effort to protect the real value of their assets from erosion due to inflation.

Q: How does dependency ratio affect the number of savings in Indonesia?

A: Dependency ratio, which measures the proportion of unproductive population (children and elderly) on productive populations, shows negative effects on the amount of savings in the short term, but significantly in the long run. That is, in the short term, an increase in dependency ratio does not significantly affect the amount of savings. However, in the long run, an increase in dependency ratio tends to reduce the amount of savings, because the community needs to allocate more resources to meet the needs of non-productive groups.

Q: What are the recommendations to encourage an increase in the amount of savings in Indonesia?

A: Based on the results of this study, several recommendations can be submitted to encourage an increase in the amount of savings in Indonesia, including:

Increasing education and financial literacy for the community
Strengthening the Social Security System
Increasing access to financial products and services, especially for people in remote areas
Building trust in financial institutions

Q: What are the limitations of this study?

A: This study has several limitations that should be noted, including:

The study uses secondary data, which may not be comprehensive or up-to-date
The study uses a single econometric model, which may not capture the complexity of the relationships between the variables
The study does not consider the impact of other factors, such as government policies and external shocks, on the amount of savings in Indonesia

Q: What are the future research directions?

A: This study opens up several opportunities for future research, including:

Further research can be conducted to identify other factors that affect the amount of savings in Indonesia
Further research can be conducted to examine the impact of government policies and external shocks on the amount of savings in Indonesia
Further research can be conducted to evaluate the effectiveness of the recommendations made in this study

Conclusion

In conclusion, this article provides a comprehensive analysis of the factors that affect the number of savings in Indonesia. The study shows that per capita income, interest rates, inflation, and dependency ratio are all significant factors that affect the amount of savings in Indonesia. The study also provides several recommendations to encourage an increase in the amount of savings in Indonesia. By implementing the right strategy, it is hoped that the amount of savings in Indonesia can increase significantly, so that it can support sustainable economic growth and improve the welfare of the community.