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Ageing policy reforms and international capital flow in a computable two-country OLG model

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  • SADAHIRO Akira
  • SHIMASAWA Manabu

Abstract

We have developed a computable two-country general equilibrium model with overlapping generations of agents. Two main issues are addressed: (i) how does the differential ageing process across countries affect international capital flow, and (ii) to what extent do the policy reforms play a significant role in the international capital movement. Our analysis indicates that the differential ageing process promotes international capital flow from ageing countries to population-growth countries. Also, by raising the rate of return on capital, international capital flow could improve the economic welfare of the generations of the ageing country. Finally, the countries with ageing populations improve economic welfare by implementing policy reforms that raise the savings rate with or without policy changes within labor-abundant countries. JEL classification: E27; F21; G15; H55; J11

Suggested Citation

  • SADAHIRO Akira & SHIMASAWA Manabu, 2004. "Ageing policy reforms and international capital flow in a computable two-country OLG model," ESRI Discussion paper series 097, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:097
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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