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External imbalances between China and the United States: A dynamic analysis with a life-cycle model

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  • Niemeläinen, Julia

Abstract

In this paper I use a life-cycle model to study the role of population aging and pension income as drivers of China's persistent trade surplus vis-à-vis the United States. China's rapid increase in life expectancy coupled with its relatively low pension expenditures may help to explain the country's high savings rate, persistent trade surpluses and accumulation of a sizable net foreign asset position. Although China's high productivity growth has a strong negative impact on its trade balance, the model predicts a positive net foreign asset position and trade balance for China for most years in the simulation period.

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  • Niemeläinen, Julia, 2021. "External imbalances between China and the United States: A dynamic analysis with a life-cycle model," Journal of International Economics, Elsevier, vol. 131(C).
  • Handle: RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000702
    DOI: 10.1016/j.jinteco.2021.103493
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    More about this item

    Keywords

    Current account; Real interest rate; Capital flows; Demographic development; Social security; China;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • 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

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