Asymmetric demographic pressure in South-Mediterranean versus North-Mediterranean economies and its impact on international gross capital flows

Peeters, Marga (2012): Asymmetric demographic pressure in South-Mediterranean versus North-Mediterranean economies and its impact on international gross capital flows.

Abstract

According to the life-cycle theory, countries with high and rising youth ratios or high and rising old-age ratios tend to have low savings relative to investment, which depresses their capital outflows. This paper puts life-cycle theory to the test and studies the impact of demographic change on international capital flows in the Middle East and North Africa (MENA) and the Southern European countries Greece, Italy, Spain and Portugal (GISP). These two regions are asymmetric in that MENA has a young population whereas the population of GISP has been ageing rapidly. Moreover, MENA has a lower standard of living an is a much more closed economy, which may effect the ability to save and its impact on cross-border capital flows. The empirical analyses in this paper cover the period 1980-2011 and partly support the life-cycle theory for these two regions. Youth rates depressed domestic savings significantly in both the MENA and GISP regions, while ageing as well as population growth had a positive impact in the GISP region. Also, domestic savings significantly caused international capital flows.

• Item Type: MPRA Paper
• Language: English
• Keywords: Demography; international capital flows; savings; ageing
• Subjects: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F2 - International Factor Movements and International Business; F - International Economics > F3 - International Finance; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; J - Labor and Demographic Economics > J1 - Demographic Economics > J11 - Demographic Trends, Macroeconomic Effects, and Forecasts

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