Capital Flows and Demographics—An Asian Perspective

January 1, 2008

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Format: Chicago

Erik Lueth. Capital Flows and Demographics—An Asian Perspective, (USA: International Monetary Fund, 2008) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Aging, Capital account, Capital flows, Demographic change, Labor force

Keywords: Asia, Capital, Capital exporter, Capital flow, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/008
Stock No:

WPIEA2008008
ISBN:

9781451868708
ISSN:

1018-5941

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