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Demographics and the evolution of global imbalances

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  • Sposi, Michael

Abstract

The age distribution influences capital flows through aggregate saving and labor supply. To quantify this, I build a dynamic model featuring overlapping generations and international trade among 28 countries since 1970. The equilibrium is replicated by a model with a representative household in each country that experiences an endogenous discount factor, which summarizes the co-evolution of demographics and relevant prices, affording computation of the exact transition. On average, a one-year increase a countrys mean age boosts its current account by 0.4 percent of GDP. Bilateral trade frictions dictate the cross-country response of capital flows to changes in a countrys demographics.

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  • Sposi, Michael, 2022. "Demographics and the evolution of global imbalances," Journal of Monetary Economics, Elsevier, vol. 126(C), pages 1-14.
    • Handle: RePEc:eee:moneco:v:126:y:2022:i:c:p:1-14
    DOI: 10.1016/j.jmoneco.2021.11.005
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    2. Joseph Steinberg, 2019. "On the Source of U.S. Trade Deficits: Global Saving Glut or Domestic Saving Drought?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 200-223, January.
    3. Andrea Papetti, 2021. "Population aging, relative prices and capital flows across the globe," Temi di discussione (Economic working papers) 1333, Bank of Italy, Economic Research and International Relations Area.
    4. Thomas F. Cooley & Espen Henriksen & Charlie Nusbaum, 2019. "Demographic Obstacles to European Growth," NBER Working Papers 26503, National Bureau of Economic Research, Inc.
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    6. Miriam Koomen & Laurence Wicht, 2023. "Demographics and Current Account Imbalances: Accounting for the Full Age Distribution," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(3), pages 719-758, September.

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    More about this item

    Keywords

    Demographics; Global imbalances; Dynamics; International trade;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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