Working Paper: CEPR ID: DP13180
Authors: Nicolas Coeurdacier; Zsofia Barany; Stphane Guibaud
Abstract: 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.
Keywords: aging; household saving; international capital flows
JEL Codes: E21; F21; J11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| global aging (J14) | uphill capital flows from emerging economies to advanced economies (F32) |
| demographic shifts (J11) | savings behavior changes (D14) |
| savings behavior changes (D14) | differences in capital flows (F32) |
| decline in world interest rate (E43) | differences in savings rates across countries (E21) |
| differences in savings rates across countries (E21) | deterioration in net foreign asset positions of advanced economies (F65) |
| aging more slowly (J14) | attract capital (F21) |
| aging more rapidly (J14) | export capital (F10) |
| demographic factors (J11) | explain observed capital flows (F32) |