Ageing and Export Dependency

The primary manifestation of the demographic transition in a modern economic context is through ageing and the primary transmission from ageing to the macro economy is through its effect on saving and investment behavior. These two effects taken together suggest a strong impact from the continuing process of ageing on international capital flows and global macroeconomic imbalances. This paper explores the potential relationship between ageing on a macroeconomic level and the reliance, or outright dependency, on exports and foreign asset income to achieve economic growth. The paper’s argument is both theoretical and empirical. Using a standard overlapping generation framework (OLG) in an open economy context this paper discusses whether the proposed relationship between a transition into old age and dissaving is feasible and desirable (or even optimal?). Finally, an empirical analysis is presented on Germany and Japan to show how these two economies, as the oldest in the world, may exactly be in a state of export dependency.