Why Aging Induces Deflation and Secular Stagnation

R. Braun and Daisuke Ikeda

No 2022-12, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We provide a quantitative theory of deflation and secular stagnation. In our lifecycle framework, an aging population puts persistent downward pressure on the price level, real interest rates, and output. A novel feature of our theory is that it also recognizes the reactions of government policy. The central bank responds to falling prices by reducing its policy nominal interest rate, and the fiscal authority responds by allowing the public debt–gross domestic product ratio to rise.

Keywords: monetary policy; lifecycle; portfolio choice; secular stagnation; nominal government debt; aging; Tobin effect; fiscal policy; deflation (search for similar items in EconPapers)
JEL-codes: D15 E52 E62 G51 (search for similar items in EconPapers)
Pages: 49
Date: 2022-09-29
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in 2022

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Working Paper: Why Aging Induces Deflation and Secular Stagnation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:95073

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DOI: 10.29338/wp2022-12

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