How Demographic Structure Determines International Capital Flows

Zhu Chao1, Lin Bo 2, Zhang Linjie 3 and Zhu Ying 4
1,2,3 School of Finance, Capital University of Economics and Business, Beijing, China
4 Department of Economics, University of Minnesota, Minneapolis, USA

 
Abstract: This paper investigated the relationship between demographic structure and international capital flows with panel data of 190 countries over the past 60 years and projection data for the 21st century. As found, from a global perspective, the current account balance (CAB) is negatively related to the dependency ratio, and orresponding to continuous change, international capital flows tend to move from “adult countries” to “aged or young countries.” Since the middle of the 20th century, the U.S., Europe, Japan, China, Southeast Asia, Central Asia, South Asia, West Asia and Africa took turns in exporting capital to other countries. In the 21st century, Europe, the U.S., Australia and Singapore will keep importing capital, while China in the 2030s, and Southeast Asia in the 2050s will in turn become the main capital importers. Given the demographic structure of China and the world, the future pattern of the international capital flows requires more serious concern and responses.
Keywords: demographic structure, current account balance, international capital flows

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