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Demographic Change, Foresight and International Capital Flows

Author

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  • Melanie Lührmann

    (Munich Center for the Economics of Aging (MEA))

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.

Suggested Citation

  • Melanie Lührmann, 2003. "Demographic Change, Foresight and International Capital Flows," MEA discussion paper series 03038, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    • Handle: RePEc:mea:meawpa:03038
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    References listed on IDEAS

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    Cited by:

    1. Axel Börsch‐Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    2. Axel Börsch-Supan & Alexander Ludwig, 2010. "Old Europe Ages: Reforms and Reform Backlashes," NBER Chapters, in: Demography and the Economy, pages 169-204, National Bureau of Economic Research, Inc.
    3. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi-Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    4. Hans Fehr & Sabine Jokisch, 2006. "Demographischer Wandel und internationale Finanzmärkte," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(4), pages 501-517, November.
    5. De Santis, Roberto A. & Lührmann, Melanie, 2009. "On the determinants of net international portfolio flows: A global perspective," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 880-901, September.
    6. Berkel Barbara, 2007. "Institutional Determinants of International Equity Portfolios - A Country-Level Analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-33, October.
    7. Vansteenkiste, Isabel & Nickel, Christiane, 2008. "Fiscal policies, the current account and Ricardian equivalence," Working Paper Series 935, European Central Bank.
    8. Kábrt, Tomáš & Brůna, Karel, 2022. "Asymmetric effects of foreign capital on income inequality: The case of the Post-China 16 countries," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 613-626.
    9. Börsch-Supan, Axel & Ludwig, Alexander & Winter, Joachim, 2004. "Aging, Pension Reform, and Capital Flows:," Sonderforschungsbereich 504 Publications 04-65, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.

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