Population Aging and Global Capital Flows in a Parallel Universe

What to Expect From the Euro

Author: Mr. Robin Brooks

This paper explores the global impact of population aging, using a calibrated overlapping generations model of eight world regions to simulate the effects of historical and projected demographic trends on international capital flows. The simulations show that there will be a turning point in regional savings - investment balances between 2010 and 2030 when the European Union and North America will experience a substantial decline in savings relative to investment as their populations age rapidly. This shift will be financed by capital flows from less developed regions which are projected to become capital exporters.

Volume/Issue: Volume 2000 Issue 151

Publication date: August 2000

ISBN: 9781451857023

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Topics covered in this book

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Business and Economics , Social Science , Exports and Imports , Demography , WP , interest rate , capital deepening , real GDP , population aging , international capital flows , EU current account , JAP relative , EU experience , age distribution , productivity parameter , balance in the EU , current account switch , Current account , Current account balance , Aging , Current account deficits , Demographic change , North America , Global , Africa

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Summary

This paper explores the global impact of population aging, using a calibrated overlapping generations model of eight world regions to simulate the effects of historical and projected demographic trends on international capital flows. The simulations show that there will be a turning point in regional savings – investment balances between 2010 and 2030 when the European Union and North America will experience a substantial decline in savings relative to investment as their populations age rapidly. This shift will be financed by capital flows from less developed regions which are projected to become capital exporters.