EconPapers    
Economics at your fingertips  
 

Aging and Deflation from a Fiscal Perspective

Mitsuru Katagiri (), Hideki Konishi () and Kozo Ueda
Additional contact information
Mitsuru Katagiri: Bank of Japan
Hideki Konishi: School of Political Science and Economics, Waseda University

No 905, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Negative correlations between inflation and demographic aging were observed across developed nations recently. To understand the phenomenon from a politico-economic perspective, we embed the fiscal theory of the price level into an overlapping-generations model. In the model, successive short-lived governments choose income tax rates and bond issues considering the political influence of existing generations and the policy response of future governments. The model sheds new light on the traditional debate about the burden of national debt. Because of price adjustments, the accumulation of government debt does not become a burden on future generations. Our analysis reveals that the effects of aging depend on its causes. Aging is deflationary when caused by an increase in longevity but inflationary when caused by a decline in birth rate. Numerical simulation shows that aging over the past 40 years in Japan generated deflation of about 0.6 percentage points annually.

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)
Pages: 29pages
Date: 2014-11
New Economics Papers: this item is included in nep-age, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.kier.kyoto-u.ac.jp/DP/DP905.pdf (application/pdf)

Related works:
Working Paper: Aging and deflation from a fiscal perspective (2014) Downloads
Working Paper: Aging and Deflation from a Fiscal Perspective (2014) Downloads
Working Paper: Aging and Deflation from a Fiscal Perspective (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:905

Access Statistics for this paper

More papers in KIER Working Papers from Kyoto University, Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Ryo Okui (). This e-mail address is bad, please contact .

 
Page updated 2020-03-30
Handle: RePEc:kyo:wpaper:905