Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model

Population ageing and pension reform will have profound effects on international capital markets. In order to quantify these effects, we develop a computational general equilibrium model. We feed this multi‐country overlapping‐generations model with detailed long‐term demographic projections for seven world regions. Our simulations indicate that capital flows from rapidly ageing regions to the rest of the world will initially be substantial, but that trends are reversed when households decumulate savings. We also conclude that closed‐economy models of pension reform miss quantitatively important effects of international capital mobility.