DP13180 Capital Flows in an Aging World
|Author(s):||Zsofia Barany, Nicolas Coeurdacier, Stéphane Guibaud|
|Publication Date:||September 2018|
|Keyword(s):||aging, Household Saving, International Capital Flows|
|JEL(s):||E21, F21, J11|
|Programme Areas:||International Macroeconomics and Finance|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=13180|
We investigate the importance of worldwide demographic evolutions in shaping capital flows across countries and over time. Our lifecycle model incorporates cross-country differences in fertility and longevity as well as differences in countries' ability to borrow inter-temporally and across generations through social security. In this environment, global aging triggers uphill capital flows from emerging to advanced economies, while country-specific demographic evolutions reallocate capital towards countries aging more slowly. Our quantitative multi-country overlapping generations model explains a large fraction of capital flows across advanced and emerging countries and a substantial portion of the prolonged decline in the world interest rate.