Social and Behavioral Sciences Commons^™

Worldwide Population Aging: Endogenous Policy Formation And Capital Market Transmissions In The Presence Of Symmetric Demographic Shocks, Mehmet Serkan Tosun

Center for Policy Research

This paper examines the transition effects of population aging in more developed regions that is also expected to occur in developing regions in the near future. We address these effects by exploring the influences of internationally mobile capital and a politically responsive fiscal policy in a two-country overlapping generations model. Our results show that the combination of capital mobility and endogenous fiscal policy play an important role in how economies respond to population aging. Capital mobility has consumption smoothing effects but endogenous fiscal policy is the key factor in creating asymmetries between countries. The interaction of the two may even …