The Impact of Ageing on International Capital Flows in a Heterogeous World with Imperfect Capital Mobility

Henri de Groot and Paul J.G. Tang

No 331056, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper develops and calibrates a simple neoclassical model of economic growth to analyse the impact of ageing on international capital markets. Savings depend on the age structure of the population, but also on the growth rate and the per capita income level. Capital immobility results in real interest rate differentials that depend on the Net Foreign Asset Position of countries. In such a world, the impact of ageing on international capital markets depends on a range of mechanisms, partly offsetting each other. The main mehanisms that are presents in the model are that ageing reduces labour supply and thus reduces investment demand, while at the same time it reduces savings. The effect on the Net Foreign Asset Position, the user cost of capital and the world interest rate is therefore ambiguous. Within the context of such a model, the main questions that we address are how important demographic changes are for international capital flows and how capital mobility affects the allocation of investment funds in economies that are ageing at different speeds. We will initially restrict the attention to the developed countries. Subsequently, we address the implications of ageing for capital flows between developed and developing regions

Keywords: Labor and Human Capital; International Development (search for similar items in EconPapers)
Pages: 35
Date: 2002
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Related works:
Working Paper: The Impact of Ageing on International Capital Flows in a Heterogeneous World with Imperfect Capital Mobility (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331056

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