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Demographic structures, savings, and international capital flows

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  • Turnovsky, Stephen J.
Abstract
This paper investigates how the different demographic characteristics of two countries will drive the flow of capital between them, as inhabitants of the longer-lived nation have a higher savings rate than do those with the shorter lifespan. It is motivated by the recent US experience during which its net foreign asset position declined dramatically, while simultaneously its longevity has fallen increasingly below that of other developed G7 economies. Our contribution is to address the issue by introducing empirically based survival (mortality) functions into a traditional two country macrodynamic framework. In doing so, we eliminate some of the unsatisfactory aspects associated with the traditional two country representative agent model. The sensitivity of the capital flows and the resulting net foreign assets of the two economies to key structural characteristics, and their consequences for savings are emphasized.

Suggested Citation

  • Turnovsky, Stephen J., 2019. "Demographic structures, savings, and international capital flows," Journal of International Money and Finance, Elsevier, vol. 98(C), pages 1-1.
    • Handle: RePEc:eee:jimfin:v:98:y:2019:i:c:6
    DOI: 10.1016/j.jimonfin.2019.102062
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    References listed on IDEAS

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    More about this item

    Keywords

    Demographic transition; Net foreign assets; International capital flows;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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