Population aging and money demand

Lei Wang and Taihui Zhu

Economics Letters, 2021, vol. 206, issue C

Abstract: This paper proposes the hypothesis that population aging could lead to higher demand for money. A testable implication is derived from this hypothesis on the basis of Friedman’s money demand function, which is that the proportion of old-age population is negatively correlated with the velocity of money. The testable implication is verified with the cross section data of 204 countries and the time series data of the US. This paper’s study provides a partial explanation for why the quantity theory of money appears ineffective in developed countries.

Keywords: Money demand; Population aging; The quantity theory of money (search for similar items in EconPapers)
JEL-codes: E31 E41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002615

DOI: 10.1016/j.econlet.2021.109984

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