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Capital Flows and Demographics—An Asian Perspective

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  • Erik Lueth

Abstract

This paper calibrates the production functions of 176 countries to fit 2003 data and examines the capital flows that emerge, when labor forces change according to the 2007 UN population projections. It finds that demographic factors are no help in correcting today's global imbalances; that Japan's capital outflows have as much to do with population aging as with the yen carry-trade; and that China is key to understanding Asia's demographic impact on the world. It also finds that Asia offers the greatest arbitrage opportunities worldwide during the demographic transition and has the greatest potential for regional financial integration among world regions. Moreover, the demographic transition is unlikely to result in an asset price meltdown and could even raise world interest rates under perfect capital mobility.

Suggested Citation

  • Erik Lueth, 2008. "Capital Flows and Demographics—An Asian Perspective," IMF Working Papers 08/8, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/8
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    References listed on IDEAS

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    6. David N. Weil, 2006. "Population Aging," NBER Working Papers 12147, National Bureau of Economic Research, Inc.
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    14. repec:fth:harver:1490 is not listed on IDEAS
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    Cited by:

    1. Jong-Won Yoon & Jinill Kim & Jungjin Lee, 2014. "Impact of Demographic Changes on Inflation and the Macroeconomy," IMF Working Papers 14/210, International Monetary Fund.
    2. Guonan Ma & Zhou Haiwen, 2009. "China’s evolving external wealth and rising creditor position," BIS Working Papers 286, Bank for International Settlements.

    More about this item

    Keywords

    Capital flows; Aging; Asia; Population; Interest rates; Labor; demographics; capital accounts; global capital flows; capital mobility; capital outflows;

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