| Abstract | During the past four decades, the global economy has experienced a long-term decline of saving rate rather than “global saving glut”. Therefore, countries with higher saving rate should not be blamed for global imbalance. This paper focuses on two groups of countries, high-income and upper-middle income countries, which determine the dynamics of global economy. Based on some stylized facts relating to change of demography and saving rate, I build an overlapping-generations model to analyze the mechanism of decline of global saving rate and its relationship with global imbalance. The model and econometric tests show it’s the behavior of group of high-income countries that decides the trend of global saving rate, while the group of upper-middle countries just reacts passively to that trend, although demographic dynamics of latter, especially its demographic dividend caused by the decreasing child dependency, make it possible for the former to decrease its saving rate. The asymmetry between the influences of these two groups of countries is the natural result of new “core-periphery” global model. Today’s global crisis reflects the “exorbitant privilege” enjoyed by core countries, i.e. high-income countries, is not sustainable and the only way out of crisis will be the increase of saving rate of core countries. But the process of increasing saving rate has been proved difficult and the economic consequence of that increase is also highly uncertain. |