Population Aging, Transition to Service Economy, and Effects of Monetary Policy

Jaeho Lee
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Jaeho Lee: Bank of Korea

International Journal of Central Banking, 2026, vol. 22, issue 1, 101-144

Abstract: This paper examines how the transition to the service economy induced by population aging affects the effectiveness of monetary policy. Using the euro-area panel data, I estimate that a 1 percentage point increase in the proportion of the population aged 65 or over is associated with the rise (decline) in the service (manufacturing) sector share by 1.11 (0.96) percentage points. Both empirical and theoretical analyses also find that monetary policy has a less significant impact on the service sector than on the manufacturing sector. Finally, these findings reveal that the output effects of monetary policy can decrease by 1.48 to 2.27 percent when the share of the population 65 or over rises by 1 percentage point.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2026:q:1:a:3

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