External imbalances between China and the United States: A dynamic analysis with a life-cycle model

Julia Niemeläinen

Journal of International Economics, 2021, vol. 131, issue C

Abstract: In this paper I use a life-cycle model to study the role of population aging and pension income as drivers of China's persistent trade surplus vis-à-vis the United States. China's rapid increase in life expectancy coupled with its relatively low pension expenditures may help to explain the country's high savings rate, persistent trade surpluses and accumulation of a sizable net foreign asset position. Although China's high productivity growth has a strong negative impact on its trade balance, the model predicts a positive net foreign asset position and trade balance for China for most years in the simulation period.

Keywords: Current account; Real interest rate; Capital flows; Demographic development; Social security; China (search for similar items in EconPapers)
JEL-codes: E21 E22 E43 E62 F21 F41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000702

DOI: 10.1016/j.jinteco.2021.103493

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