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 long-term capital flows across advanced and emerging countries.