Demographic structure, international lending and borrowing in growing interdependent economies

This paper examines how demographic structure affects international lending and borrowing in a two-country model of overlapping generations à la Blanchard and Weil and endogenous growth. It is shown that although growth rates are equalized between countries, international asset positions in the long run are not. They are determined by the countries' demographic structures. A country with high (low) birth and death rates becomes a debtor (creditor) country. We also examine the effect of a change in demographic structure on the growth rate. J. Japanese Int. Economies19 (1) (2005) 135-162.