Demographic change and natural interest rate of China

Buben Fu and Bin Wang

Finance Research Letters, 2024, vol. 59, issue C

Abstract: We study the impact of demographic change on the natural interest rate of China. We analyze the effect of aging population by constructing an overlapping generations model, which embeds demographics, technology and public debt to facilitate simulating China’s natural interest rate and its counterfactuals. We find that China’s natural interest rate has been declining slowly ever since 2000 and the main driver of this downward trend is the declining mortality rate. In the next two decades, due to increasing young labor, China’s natural interest rate will have a flat period of about ten years in the downward trend.

Keywords: Demographics; Natural interest rate; Population aging (search for similar items in EconPapers)
JEL-codes: E43 E52 G12 J11 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011844

DOI: 10.1016/j.frl.2023.104812

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