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Transmission of Demographic Shock Effects from Large to Small

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  • Turalay Kenc

    (Birkbeck College, University of London, UK)

  • Serdar Sayan

    (Bilkent University, Ankara, Turkey)

Abstract

This paper addresses an issue that has been overlooked in the literature on the effects of population ageing: Transmission onto small countries of the economic effects of population ageing, a natural, demographic outcome of the shock that many large industrial countries experienced in the form of a baby boom in the late 1940s and early 1950s. It is argued in the paper that international commodity and capital flows provide channels for the transmission of these effects that include changes in the terms of trade and interest rates in large countries. The issue is considered in the context of possible effects on Turkey of the demographic shock effects transmitted from Europe. The discussion is carried out in reference to the simulation results from an overlapping generations, general equilibrium model parametrised to mimic the current state of four largest members of the EU and Turkey. The simulation exercises lead to the following conclusions: First, changes in the age composition of Turkish population to occur in the course of the country’s own demographic transition will affect the time paths of consumption, savings, investment and output substantially. Secondly, when they are transmitted onto Turkey, the economic effects of baby boomers’ ageing in the EU will magnify the effects of the demographic transition in this country. This is a finding with implications for long term growth prospects of a country, and appears to be relevant to other small countries whose close economic ties with the industrial nations with ageing populations make them vulnerable to the effects of population ageing even if they have relatively young populations now.

Suggested Citation

  • Turalay Kenc & Serdar Sayan, 1998. "Transmission of Demographic Shock Effects from Large to Small," GE, Growth, Math methods 9804001, EconWPA.
  • Handle: RePEc:wpa:wuwpge:9804001
    Note: Type of Document - PostScript Document; prepared on IBM PC; to print on HP 6MP/PostScript; pages: 20 ; figures: Submitted in EPS Format (FIG1.EPS thru FIG5.EPS). Text was originally prepared in Word for Windows 6.0 and submitted via ftp in PS format. Figures were originally created in TeX and submitted via ftp in EPS format.
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    References listed on IDEAS

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    Cited by:

    1. Jacques Le Cacheux & Vincent Touzé, 2002. "Les modèles d'équilibre général calculable à générations imbriquées. Enjeux, méthodes et résultats," Revue de l'OFCE, Presses de Sciences-Po, vol. 80(1), pages 87-113.
    2. Arezki, Rabah, 2010. "Asymmetric demographic shocks and institutions: The impact on international capital flows and welfare," MPRA Paper 27683, University Library of Munich, Germany.
    3. Patrick GEORGES & Marcel MERETTE, "undated". "Demographic Changes and the Gains from Globalisation: An Overlapping Generations CGE Analysis," EcoMod2009 21500035, EcoMod.
    4. 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).
    5. M. Aglietta & J. Chateau & J. Fayolle & M. Juillard & J. Le Cacheux & G. Legarrec & V. Touzé, 2002. "Macroeconomic consequences of pension reforms in Europe:," Computing in Economics and Finance 2002 216, Society for Computational Economics.
    6. Aglietta, Michel & Chateau, Jean & Fayolle, Jacky & Juillard, Michel & Le Cacheux, Jacques & Le Garrec, Gilles & Touze, Vincent, 2007. "Pension reforms in Europe: An investigation with a computable OLG world model," Economic Modelling, Elsevier, vol. 24(3), pages 481-505, May.
    7. INGENUE & Michel Aglietta, 2001. "Macroeconomic Consequences of Pension Reforms in Europe: an Investigation with the INGENUE World Model," Working Papers 2001-17, CEPII research center.

    More about this item

    Keywords

    Demographic Shocks and Ageing Populations; Overlapping Generations; General Equilibrium; Simulation Models; Turkey and the EU.;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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