Aging and deflation from a fiscal perspective

Mitsuru Katagiri, Hideki Konishi and Kozo Ueda

Journal of Monetary Economics, 2020, vol. 111, issue C, 1-15

Abstract: Negative correlations between inflation and aging are observed across developed nations. To understand such correlations from a politico-economic perspective, we embed the fiscal theory of the price level into an overlapping-generations model, with short-lived governments choosing tax rates and bond issues. Aging is deflationary when caused by an increase in longevity but inflationary when caused by a decline in birth rate. Over the past 40 years, aging has generated non-negligible deflationary pressure in Japan. Our analysis sheds new light on the controversy over the burden of national debt and the commitment effect of strategic debt creation.

Keywords: Deflation; Fiscal theory of the price level; Politico-economic equilibrium (search for similar items in EconPapers)
JEL-codes: D72 E30 E62 E63 H60 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Aging and deflation from a fiscal perspective (2014)
Working Paper: Aging and Deflation from a Fiscal Perspective (2014)
Working Paper: Aging and Deflation from a Fiscal Perspective (2014)
Working Paper: Aging and Deflation from a Fiscal Perspective (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:111:y:2020:i:c:p:1-15

DOI: 10.1016/j.jmoneco.2019.01.018

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