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.