The Impacts Of The Demographic Transition On The Balance Of Trade In China

The balance of the foreign trade can be affected by a lot of factors. It's worthy to study if a demographic transition can affect the foreign trade balance. The balance of the foreign trade is equal to output minus consumption, investment and government purchase. Moreover, it's equal to national savings minus domestic investment. A demographic transition indirectly affects the balance of the foreign trade through the above economic variables. The result of the analysis on an overlapping generation model shows that a demographic transition has a significant impact on the trade balance. The effect can be positive and also can be negative which is decided by the relative intensity of the demographic impacts on savings and investment The empirical results of cointegrated panels show that in the long run, the increase in the non-working population rate will have a negative impact on the balance of the trade in China, while the working-age population rate has a dramatic positive impact, the rate of the elderly population and the rate of the young population have a less dramatically negative impact and a dramatically negative impact respectively, and the impact of the elderly population is about twice than that of the young population. Considering the cumulative and lagged effects, dynamic panels with difference-GMM estimation are used to continue to study the impact. The results of the dynamic panels are consistent with cointegrated panels', except for the estimated values are larger and more dramatic. The regional empirical results are consistent with the entire nations, and the impact of the demographic factor on eastern areas is greater than central and western areas. The results of the impulse response function of a panel VAR model show that there are sustained weakening effects for the balance of the trade in the long run except for a fluctuation in the short run when a positive shock is given to the non-working population. Therefore, this paper recommends that it's better to adjust the age structure in a good way, to take good use of the human resources, to change the export mode, to achieve the balanced regional development and so on.