The south's demographic transition and international capital flows in a financially integrated world economy - Sciences Po Access content directly
Preprints, Working Papers, ... Year : 2019

The south's demographic transition and international capital flows in a financially integrated world economy

Abstract

In the coming decades, the countries of the South will be facing the aging of the population faster than the countries of the North. This will have long-term economic consequences for the South but also for the North through the changing of international capital flows. To study the latter, we build a simple two-region two-period OLG model, assuming fully integrated financial markets. This allows us to determine the analytical expression of the world interest rate dynamics at general equilibrium and the resulting capital flows accruing to each of the two regions (the North and the South). From there, we analyse how a reduction in either fertility or mortality alters the magnitude of the international capital flows. Contradictory effects are evidenced. To clear up any ambiguity and to study the South's demographic transition, which involves a succession of shocks, we propose numerical simulations. Even if the results stress that the institutional context and technological catching-up may matter, they suggest in a rather general way that the declines in both fertility and mortality tend to reduce the relative capital needs of the Southern economies and consequently their capital inflows. This, in turn, would be beneficial to the North's productive capacity, which should then hold more capital.
Fichier principal
Vignette du fichier
wp2019-17-the-south-s-demographic-transition-fgannon.pdf.pdf (496.93 Ko) Télécharger le fichier
Origin Publisher files allowed on an open archive

Dates and versions

hal-03403272 , version 1 (26-10-2021)

Identifiers

Cite

Frédéric Gannon, Gilles Le Garrec, Vincent Touzé. The south's demographic transition and international capital flows in a financially integrated world economy. 2019. ⟨hal-03403272⟩
52 View
47 Download

Share

Gmail Mastodon Facebook X LinkedIn More