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The Global Impact of Demographic Change

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Author Info
Nicoletta Batini
Tim Callen
Warwick J. McKibbin

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Abstract

The world is in the midst of a major demographic transition. This paper examines the implications of such transition over the next 80 years for Japan, the United States, other industrial countries, and the developing regions of the world using a dynamic intertemporal general equilibrium four-country model containing demographics calibrated to the "medium variant" of the United Nations population projections. We find that population aging in industrial countries will reduce aggregate growth in these regions over time, but should boost growth in developing countries over the next 20-30 years, as the relative size of their workingage populations increases. Demographic change will also affect saving, investment, and capital flows, implying changes in global trade balances and asset prices. We also explore the sensitivity of the results to assumptions about future productivity growth and country external risk for the developing country region.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/9.

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Length: 36 pages
Date of creation: 19 Jan 2006
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Handle: RePEc:imf:imfwpa:06/9

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Keywords: Capital flows Japan United States Aging Population Savings Investment Economic models

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Hans Fehr & Sabine Jokisch & Laurence Kotlikoff, 2003. "The Developed World's Demographic Transition - The Roles of Capital Flows, Immigration, and Policy," NBER Working Papers 10096, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 769-97, August. [Downloadable!] (restricted)
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  5. Equipe INGENUE, 2001. "Macroeconomic consequences of pension reforms in Europe: an investigation with the INGENUE world model," CEPREMAP Working Papers (Couverture Orange) 0116, CEPREMAP. [Downloadable!]
  6. 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.
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  7. McKibbin, Warwick J & Vines, David, 2000. "Modelling Reality: The Need for Both Inter-temporal Optimization and Stickiness in Models for Policy-Making," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 106-37, Winter.
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  11. Hamid Faruqee & Douglas Laxton & Steven A. Symansky, 1996. "Government Debt, Life-Cycle Income and Liquidity Constrains: Beyond Approximate Ricardian Equivalence," IMF Working Papers 96/140, International Monetary Fund.
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  15. repec:fth:harver:1490 is not listed on IDEAS
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  17. Attanasio, O.P. & Violante,G.L., 2000. "The Demographic Transition in Closed and Open Economies: A Tale of Two Regions," RES Working Papers 412, Inter-American Development Bank, Research Department.
  18. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rod Tyers & Qun Shi, 2006. "Demographic Change and Policy Responses: Implications for the Global Economy," ANUCBE School of Economics Working Papers 2006-469, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
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  2. Rod Tyers & Qun Shi, 2006. "Global Demographic Change, Labour Force Growth and Economic Performance," ANUCBE School of Economics Working Papers 2006-462, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  3. Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2007. "Local Governments in the Wake of Demographic Change: Efficiency and Economies of Scale in German Municipalities," ZEW Discussion Papers 07-036, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  4. L. Randall Wray, 2006. "Global Demographic Trends and Provisioning for the Future," Economics Working Paper Archive wp_468, Levy Economics Institute, The. [Downloadable!]
  5. Robert Dekle, 2004. "Financing Consumption in an Aging Japan: The Role of Foreign Capital Inflows in Immigration," NBER Working Papers 10781, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Ross Guest & Grant Scobie & John Bryant, 2003. "Population Ageing in New Zealand: The Impact on Living Standards and the Optimal Rate of Saving with a Flexible Real Exchange Rate," Treasury Working Paper Series 03/34, New Zealand Treasury. [Downloadable!]
  7. Nicoletta Batini & Papa N'Diaye & Alessandro Rebucci, 2005. "The domestic and global impact of Japan’s policies for growth," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
    Other versions:
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