Demographic Change, Foresight and International Capital Flows

Melanie Lührmann ()
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Melanie Lührmann: Munich Center for the Economics of Aging (MEA), Postal: Amalienstr. 33, D-80799 Munich
Authors registered in the RePEc Author Service: Melanie Lührmann

No 3038, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: This paper studies the relationship between demographic change and international capital flows using a large cross-country time-series dataset. The analysis provides empirical evidence of a substantial and twofold demographic effect on international capital flows: First, capital flows are induced by changes in present demography. Countries with a large working-age population tend to be net exporters of capital, relatively younger economies importers of capital and extremely aged countries with a major population share of elderly also tend to import capital. In particular, high youth dependency induces current account deficits. Second, the paper provides evidence that future demographic changes are anticipated and affect current net capital flows, too. This twofold demographic effect on international capital flows can be hampered by capital controls and other capital market frictions. The impact of these frictions is also explored in the paper. The results indicate that they indeed affect capital flows.

JEL-codes: Z00 (search for similar items in EconPapers)
Date: 2003-11-16
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Citations: View citations in EconPapers (14)

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