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Fertility, Longevity and International Capital Flows

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  • Zsofia Barany

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Nicolas Coeurdacier

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Guibaud

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

The neoclassical growth model predicts large capital flows towards fast-growing emerging countries. We show that incorporating fertility and longevity into a lifecycle model of savings changes the standard predictions when countries differ in their ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers capital flows from emerging to developed countries, and countries' current account positions respond to growth adjusted by current and expected demographic composition. Data on international capital flows are broadly supportive of the theory. The fact that fast-growing emerging countries are also aging faster, while having less developed credit markets and pension systems, explains why they are more likely to export capital. Our quantitative multi-country overlapping generations model explains a significant fraction of the patterns of capital flows, across time and across developed and emerging countries.

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  • Zsofia Barany & Nicolas Coeurdacier & Stéphane Guibaud, 2015. "Fertility, Longevity and International Capital Flows," Working Papers hal-01164462, HAL.
  • Handle: RePEc:hal:wpaper:hal-01164462
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01164462
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    1. Fertility, Longevity and International Capital Flows
      by Christian Zimmermann in NEP-DGE blog on 2015-07-23 05:18:52

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