Demographics Unravelled (eBook)

AMLAN ROY is a global macro-researcher and recognised public speaker with 35 years of experience across investment banking, investment management and academia. He is the founder of Global Macro Demographics. He was most recently Head of Global Macro Policy Research and Senior MD at State Street Global Advisors (until end-June 2021) and prior to that MD and Global Head of Demographics & Pensions Research at Credit Suisse Investment Bank (1998-2016). His research is in macroeconomics, demographics and retirement, and asset pricing. He is a Research Associate at London School of Economics' Systemic Risk Centre and Honorary Fellow of the Institute and Faculty of Actuaries. He has a BA in Economics (St Stephen's College), MBA (IIM Ahmedabad), MA and PhD (University of Iowa).

Acknowledgements 5

Preface 6

Chapter 1 Introduction 8

Chapter 2. Core data: Past, Present and Future 13

2.1 Economic History, History of Global Population Trends 14

2.2 Core Demographic Variables: Data, Analysis & some observations 15

2.2.1 Population Size and Growth 15

2.2.2 Ageing Populations 16

2.2.3 Life Expectancy Increases 17

2.2.4 Total Fertility Rates 18

2.2.5 Dependency Ratios 19

2.2.6 Gender Ratios 22

2.2.7 Age Structure and Population Pyramids 23

2.2.8 The Demographic Transition Model 25

2.3 The Role of Migration 26

2.4 Urbanization 34

2.5 Small Nation States--Demographics 36

2.6 Changing Longevity--metrics need changing 37

2.7 Changing social and individual behaviour 38

2.8 Multiple Generations 40

2.9 Conclusion 41

Chapter 3 Demographics and Macroeconomics 42

3.1 Demographics and Economic Growth 42

3.2 Demographic Dividend and GDP per capita growth 47

3.3 Inflation 49

3.4 Debt, Deficits and Fiscal Sustainability 57

3.5 Demographics, Monetary Policy & Interest Rates 62

3.6 Demographics and Unemployment 63

3.7 Demographics, Capital Flows & Current Account 65

Chapter 4. Demographics and Asset Prices 66

4.1 Theories of Life Cycle Consumption, Savings & Permanent Income 66

4.1.1 Life Cycle Consumption 66

4.1.2 Permanent Income Hypothesis 67

4.1.3. Consumption, Savings & Pioneering Paul Samuelson 68

4.2 How Demographics influences equity prices and markets 69

4.3 Will there be an asset market meltdown when boomers retire? 76

4.4 Demographic changes and interest rates (bond yields) 77

4.5 Demographics and Risk Premia 80

4.6 Asset Holdings and Age 81

4.7 Demographics and Equity Sectors 83

4.8 Demographics and Real estate 87

4.9 Demographics and Commodities 89

4.10 Conclusions 91

Appendix A to Chapter 4 93

Chapter 5 Health and Longevity 94

5.1 Health Issues, Expenditures and Measures 95

5.1.1 Health Expenditures 95

5.1.2 Global Health Security 97

5.1.3 Global Burden of Disease 98

5.1.4 Health in Emerging Countries 100

5.2 Longevity 103

5.2.1 Life expectancy and Conditional Life expectancy increases 104

5.2.2 Life Expectancy versus Healthy Life expectancy 105

5.2.3 DALYs and their causes 107

5.2.4 Longevity and Mortality: more than just births and deaths 107

5.2.5 Longevity risk and uncertain future of longevity 109

5.2.6 Longevity forecasting models: countries and regions 111

5.2.7 Short summary of Longevity Models 113

5.2.8 Annuities as a Longevity Risk Management Tool 116

5.2.9 Other Longevity Risk Management Tools & Instruments 119

5.3 Conclusions 120

Chapter 6. Pensions & Retirement 121

6.1 A Brief History of Social Security and Pensions 121

6.2 Evaluating Pension Systems--Indicators & Cross-country comparisons 124

6.3 Assessing Age-related pension expenditures across countries 129

6.4 Pensions and pension systema-the experts views 131

6.5 Pensions, Asset Allocation, Investments & Capital Markets 139

6.6 Pensions & Corporate Finance/Equity Prices 142

6.7 Future of Retirements/Conclusions 143

Chapter 7 Quality of Life, Gender, Governance, Politics & Sustainability 145

7.1 Utility theory, Social welfare and Happiness 145

7. 2 Quality of Life--Human Development Index, Human Capital 149

7.3 Gender Inequality 151

7.4 Corruption & Transparency 153

7.5 Sustainability & Climate Change 154

7.6 Politics & Geopolitics 156

7.7 Conclusions 157

Chapter 8. Summary & Conclusions 158

Index of subjects 160

End Notes 162