Saving and Demographic Change: the Global Dimension

Falling long-term interest rates worldwide have led some policy-makers to speculate on the emergence of a glut of global saving (Bernanke, 2005). The global trend contrasts markedly with that of the United States, where the public discussion has focused on an ongoing decline of private saving and the re-emergence of large budget deficits. The absence of saving in the United States, in conjunction with strong domestic investment opportunities, has created a current account deficit of unprecedented size — $800 billion in 2005, which has been matched by surpluses in every other region of the world. Thus, there are two perspectives on the global saving imbalance: Why is there a large saving shortfall in the United States, and why is there such a large excess in the rest of the world? In this paper we attempt to link the global imbalances to the impact of demography on national saving and investment rates.