Will population ageing change the global economic equilibrium?

- "Population ageing (an increase in the proportion of elderly and pensioners in the population) normally leads to a fall in savings. In theory, this should lead to:
• in the short term, a situation of (ex ante) excess demand for goods and services, leading to inflationary pressures;
• in the long term, a rise in real interest rates that rebalances, ex post, savings and investment."
- "This situation would therefore be very different from that seen at present with excess savings, deflationary pressures and low interest rates."
- "The key question is when there will be a changeover from an equilibrium with excess savings to an equilibrium with a shortfall in savings: what is the pace of ageing? At what stage of ageing is there a decline in the savings rate?"
- "The example of Japan shows that the household and national savings rate falls when the share of the population aged over 60 in the total population increases, which will occur at a worldwide level from 2010-2012. The situation of global excess savings is therefore likely to gradually disappear, unless investment declines at the same time as savings, as in Japan."

Natixis Flash Economics 403 20100820

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