Empirical Analysis on the Relationship between Demographic Structure and Financial Deepening

Abstract

Changes in population structure have a major effect on the development of financial sector in economies. This paper uses the fixed effect model to estimate this impact with data of 217 countries from year 2000 to 2019, taking the ratio of M2 and GDP as the explained variable, the elderly dependency ratio and the child dependency ratio the explanatory variables and finding that financial development first increases and then decreases with the increase of the dependency ratio of the population, showing an inverted U-shaped curve as a whole. According to this conclusion, this paper makes relative policy recommendations, such as keeping the birth rate within a reasonable range, improving the productivity of labors and strengthening the training of young labors.