The Effects of Demographic Changes on the Real Interest Rate in Japan

Daisuke Ikeda and Masashi Saito
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Masashi Saito: Bank of Japan

No 12-E-3, Bank of Japan Working Paper Series from Bank of Japan

Abstract: What are the effects of demographic changes on the real interest rate in Japan? We present a dynamic general equilibrium model in which demographic changes are captured by exogenous changes in the ratio of workers to the total population. Our model predicts that a decline in this ratio in the process of population aging lowers the real interest rate; and the demographic impact on the real interest rate is amplified by a fall in land prices in the presence of collateral constraints. The model is simulated with the realized and forecasted changes in the working-age population ratio and the TFP growth in Japan. Our results indicate that the TFP growth is the main source of variations in the real interest rate, but the demographic factor is also quantitatively important especially for its long-term movements.

Keywords: Demographics; land prices; real interest rate; collateral constraint (search for similar items in EconPapers)
JEL-codes: E20 E43 J11 (search for similar items in EconPapers)
Date: 2012-02-27
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Citations: View citations in EconPapers (21)

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Related works:
Journal Article: The effects of demographic changes on the real interest rate in Japan (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:boj:bojwps:12-e-3

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