Aging, Secular Stagnation and the Business Cycle

Callum Jones

No 2018/067, IMF Working Papers from International Monetary Fund

Abstract: As of 2015, U.S. log output per capita was 12 percent below what its pre-2008 linear trend would predict. To understand why, I develop and estimate a model of the US with demographics, real and monetary shocks, and the occasionally binding ZLB on nominal rates. Demographic changes generate slow-moving trends in the real interest rate, employment, and productivity. I find that demographics alone can explain one-third of the gap between log output per capita and its linear trend in 2015. Demographics also lowered real rates, causing the ZLB to bind between 2009 and 2015, contributing to the slow recovery after the Great Recession.

Keywords: WP; real interest rate; monetary policy; business cycle; Great Recession; Demographics; Zero Lower Bound; Forward Guidance; age-productivity profile; ZLB duration; utility function; monetary policy shock; lower bound; marginal utility; age-productivity curve; ZLB regime; productivity adjustment; ZLB constraint; adjustment cost; growth rate; Demographic change; Real interest rates; Aging (search for similar items in EconPapers)
Pages: 45
Date: 2018-03-23
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Citations: View citations in EconPapers (24)

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Journal Article: Aging, Secular Stagnation, and the Business Cycle (2023)
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