A Directed Acyclic Graph Demonstrating The Effects Of Population Aging On Saving And Interest Rates In Europe
Population aging in Europe and other parts of the industrialized world will have significant effects on labor supplies, saving rates, and by extension investment and interest rates. This thesis examines a number of economic studies that attempt to project the impacts of population aging to European economies. A number of theories and assumptions concerning private, government, and national saving behavior are incorporated in these studies, and some conflicting conclusions are drawn. This paper attempts to synthesize the findings of the current literature into a directed acyclic graph (DAG) illustrating a theory of the impacts of population aging to European economies through the mechanisms of shrinking labor supplies and increasing dependency ratios. OLS regression models from the literature are then compared to causal chains drawn in the DAG to determine where these models may have improperly specified causal relationships.
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