Work

Aging and deflation from a fiscal perspective

Year: 2019

Type: article

Abstract: Negative correlations between inflation and aging are observed across developed nations. To understand such correlations from a politico-economic perspective, we embed the fiscal theory of the price level into an overlapping-generations model, with short-lived governments choosing tax rates and bond issues. Aging is deflationary when caused by an increase in longevity but inflationary when caused by a decline in birth rate. Over the past 40 years, aging has generated non-negligible deflationary pressure in Japan. Our analysis sheds new light on the controversy over the burden of national debt and the commitment effect of strategic debt creation.

Source: Journal of Monetary Economics

DOI: 10.1016/j.jmoneco.2019.01.018

Authors: Mitsuru Katagiri, Hideki Konishi, Kozo Ueda

Institutions: International Monetary Fund, Waseda University

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $1,800

Funders: Ministry of Education, Culture, Sports, Science and Technology, Japan Society for the Promotion of Science