Demographic developments have been regarded as one important cause of the long-term
movement in global interest rates. This paper provides empirical evidence of the
relationship between demographics and interest rates over a wide sample of advanced and
emerging market economies. It also finds that capital account openness limits the direct
sensitivity of a country's interest rates to its own demographics. The results suggest that
future demographic developments will continue to apply downward pressure on the
interest rates in Asia which foresees a rapid aging.