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Demography, national savings and international capital flows

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  • Matthew Higgins
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    Abstract

    This paper addresses the relationship between age distributions, national savings and the current account balance. The results point to substantial demographic effects, with increases in both the youth and old-age dependency ratios associated with lower savings rates. They also point to differential effects on savings and investment, and thus to a role for demography in determining the current account balance. The estimated demographic effect on the current account balance exceeds six percent of GDP over the last three decades for a number of countries and, given expected demographic trends, is likely to be substantially larger over the coming decades.

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    File URL: http://www.newyorkfed.org/research/staff_reports/sr34.html
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    File URL: http://www.newyorkfed.org/research/staff_reports/sr34.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 34.

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    Date of creation: 1997
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    Handle: RePEc:fip:fednsr:34

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    Related research

    Keywords: Demography ; Saving and investment ; Capital movements;

    References

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    1. Cutler, D.M. & Poterba, J.M. & Sheiner, L.M. & Summers, L.H., 1990. "An Aging Society: Opportunity Or Challenge," Working papers 553, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    3. Ram, Rati, 1982. "Dependency Rates and Aggregate Savings: A New International Cross-Section Study," American Economic Review, American Economic Association, vol. 72(3), pages 537-44, June.
    4. Ray C. Fair & Kathryn M. Dominguez, 1992. "Effects of the Changing U.S. Age Distribution on Macroeconomic Equations," NBER Working Papers 2280, National Bureau of Economic Research, Inc.
    5. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
    6. Taylor, A.M., 1991. "Capital Flows to the New World as an Intergenerational Transfer," Harvard Institute of Economic Research Working Papers 1579, Harvard - Institute of Economic Research.
    7. Weil, David N, 1994. "The Saving of the Elderly in Micro and Macro Data," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 55-81, February.
    8. repec:fth:harver:1490 is not listed on IDEAS
    9. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
    10. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
    11. Goldberger, Arthur S, 1973. "Dependency Rates and Savings Rates: Further Comment," American Economic Review, American Economic Association, vol. 63(1), pages 232-33, March.
    12. Alan M. Taylor, 1994. "Domestic Saving and International Capital Flows Reconsidered," NBER Working Papers 4892, National Bureau of Economic Research, Inc.
    13. Ronald D Lee & Andrew Mason & Tim Miller, 1998. "Saving, Wealth, and Population," Working Papers 199805, University of Hawaii at Manoa, Department of Economics.
    14. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    15. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2.
    16. Matthew Higgins & Jeffrey G. Williamson, 1996. "Asian Demography and Foreign Capital Dependence," NBER Working Papers 5560, National Bureau of Economic Research, Inc.
    17. Gersovitz, Mark, 1988. "Saving and development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 10, pages 381-424 Elsevier.
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    Cited by:
    1. F.L. MacKellar & H. Reisen, 1998. "International Diversification of Pension Assets Is No Panacea for Population Aging," Working Papers ir98034, International Institute for Applied Systems Analysis.
    2. F.L. MacKellar & T.Y. Ermolieva & H. Reisen, 1999. "Globalization, Social Security, and International Transfers," Working Papers ir99056, International Institute for Applied Systems Analysis.
    3. Leachman, Lori L. & Francis, Bill B., 2000. "Multicointegration Analysis of the Sustainability of Foreign Debt," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 207-227, April.

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