 How does population aging affect the effectiveness of fiscal stimulus over the business cycle?Jiro Honda and Hiroaki Miyamoto Journal of Macroeconomics, 2021, vol. 68, issue C Abstract: What is the impact of population aging on the effectiveness of fiscal stimulus over the business cycle? We address this question by estimating state-dependent fiscal multipliers in member countries of the Organisation for Economic Co-operation and Development (OECD). A government spending shock is identified as a forecast error of government spending and its output effect is estimated by using the local projection method. We find that there is no effect of population aging on output effects of fiscal spending shocks in expansionary times, whereas in recessions the output effects of fiscal spending shocks are weakened as population ages. This result points to important policy implications in that population aging would call for a larger fiscal stimulus to support aggregate demand during recession. Thus, this requires a larger fiscal space to allow for a wider swing of the fiscal position without creating concerns for fiscal sustainability. Keywords: Fiscal policy; Fiscal multipliers; Population aging; Business cycles (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:68:y:2021:i:c:s0164070421000021 DOI: 10.1016/j.jmacro.2021.103288 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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