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The Impact of Demographics on Productivity and Inflation in Japan

Yihan Liu () and Niklas Westelius ()
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Yihan Liu: International Monetary Fund, 700 19th Street, NW, Washington, DC, USA

Journal of International Commerce, Economics and Policy (JICEP), 2017, vol. 08, issue 02, 1-16

Abstract: Is Japan’s aging and, more recently, declining population hampering its growth and reflation efforts? Exploiting the demographic and economic variation in the prefectural data between 1990 and 2007, we find that aging of the working age population has had a significant negative impact on the total factor productivity (TFP). Moreover, prefectures that aged at a faster pace experienced lower overall inflation, while prefectures with higher population growth experienced higher inflation. The results give strong support to the notion that demographic headwinds can have a non-trivial impact on the TFP and deflationary pressures.

Keywords: Aging; inflation; Japan; population growth total factor productivity (TFP) (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1142/S1793993317500089

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