Population ageing and prices in an OLG model with money created by credits
MPRA Paper from University Library of Munich, Germany
This paper provides an explanation of why population ageing is associated with deflationary processes. For this reason, we create an overlapping-generations model (OLG) with money created by credits (inside money) and intergenerational trade. In other words, we combine a neoclassical OLG model, with post-Keynesian monetary theory. The model links demographic factors, such as fertility rates and longevity, to prices. We show that lower fertility rates lead to a smaller demand for credits, and lower money creation, which causes a decline in prices. Changes in longevity affect prices via real savings and capital market. Furthermore, we address a few links between interest rates and inflation, which arise in the general equilibrium, and are not thoroughly discussed in the literature. Long-run results are derived analytically; short-run dynamics is simulated numerically.
Keywords: Population ageing; inflation; OLG model; inside money; credits (search for similar items in EconPapers)
JEL-codes: E12 E31 J10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge, nep-ger, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66056
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