Effectiveness of Fiscal Policy in Aging Economies

Hiroaki Miyamoto and Naoyuki Yoshino ()

Public Policy Review, 2021, vol. 17, issue 3, 1-18

Abstract: This paper examines how population aging affects the effectiveness of fiscal policy. We estimate the fiscal multipliers for both aging and non-aging economies by using the panel data of OECD countries. We find that population aging weakens the output-boosting effects of fiscal policy. That is because in aging economies, the responses of private consumption and employment to fiscal stimulus become weak, resulting in a decline in the fiscal multiplier. Our analysis suggests that in aging economies, to sustain domestic demand, other economic policies and structural reforms need to play a more important role.

Keywords: population aging; fiscal policy; fiscal multiplier (search for similar items in EconPapers)
JEL-codes: E62 H30 J10 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mof:journl:ppr17_03_03

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