Capital Flows and Demographics—An Asian Perspective

Author/Editor:

Erik Lueth

Publication Date:

January 1, 2008

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper calibrates the production functions of 176 countries to fit 2003 data and examines the capital flows that emerge, when labor forces change according to the 2007 UN population projections. It finds that demographic factors are no help in correcting today's global imbalances; that Japan's capital outflows have as much to do with population aging as with the yen carry-trade; and that China is key to understanding Asia's demographic impact on the world. It also finds that Asia offers the greatest arbitrage opportunities worldwide during the demographic transition and has the greatest potential for regional financial integration among world regions. Moreover, the demographic transition is unlikely to result in an asset price meltdown and could even raise world interest rates under perfect capital mobility.

Series:

Working Paper No. 2008/008

Subject:

Aging Capital account Capital flows Demographic change Labor force

English

Publication Date:

January 1, 2008

ISBN/ISSN:

9781451868708/1018-5941

Stock No:

WPIEA2008008

Pages:

23

Please address any questions about this title to publications@imf.org