Demographics and Interest Rates in Asia
By Serkan Arslanalp (International Monetary Fund (IMF)), Jaewoo Lee (International Monetary Fund (IMF) – Research Department) & Umang Rawat (International Monetary Fund (IMF))
Demographic developments have been regarded as one important cause of the long-termmovement in global interest rates. This paper provides empirical evidence of therelationship between demographics and interest rates over a wide sample of advanced andemerging market economies. It also finds that capital account openness limits the directsensitivity of a country’s interest rates to its own demographics. The results suggest thatfuture demographic developments will continue to apply downward pressure on theinterest rates in Asia which foresees a rapid aging.