Asian Catch Up, World Growth and International Capital Flows in the XXIst Century: a Prospective Analysis with the INGENUE 2 Model

Michel Aglietta, Vladimir Borgy, Jean Chateau, Michel Juillard (), Jacques Le Cacheux (), Gilles Le Garrec () and Vincent Touze

Working Papers from CEPII research center

Abstract: The ongoing pattern of capital flows is quite unusual. Emerging market economies finance US consumers who are living beyond their means. This is clearly a misallocation of world saving that is unsustainable in the long run. The present paper uses the INGENUE 2 worldwide growth model to shape the conjecture of a growth regime for the first half of this century. The engine of growth rests on demographic and technological forces tied up together in a catching-up process involving very large countries. In this process, capital flows substantiate an intergenerational saving transfer to the huge number of people who aspire to get access to Western standard of life. Two scenarios explore the consistency of this prospect: a baseline scenario with relatively conservative hypotheses and a fast-growth scenario in China and India. In both scenarios Western Europe and Japan appear to be structural capital exporters with appreciating real exchange rates. The US progressively saves more and recovers a strong foreign net asset position. No scenario prevents world growth from decelerating with demographic trends.

Keywords: Computable General Equilibrium Models; CGEM; international capital flows; life cycle models and saving; economic growth of open economies; international factor movements; growth (search for similar items in EconPapers)
JEL-codes: C68 F21 D91 F43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-sea
Date: 2007-01

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Persistent link: http://EconPapers.repec.org/RePEc:cii:cepidt:2007-01

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