Employing a model with heterogeneous agents by age, the paper studies to what extent population aging can explain three global macroeconomic phenomena: the persistent increase in the relative price of non-tradable goods, which goes hand in hand with the inter-sectoral reallocation of resources (structural transformation); the accumulation of disequilibria in the net foreign asset positions of the main countries; the persistence of real interest rates at low levels (secular stagnation).
The results show that faster-aging countries (particularly China and India) will face greater increases in the relative price of nontradables and unprecedented accumulations of net foreign asset positions (global imbalances) over the twenty-first century. Real interest rates could persist at historical low levels due solely to the effect of demographic change.
