Aging and deflation from a fiscal perspective

Mitsuru Katagiri, Hideki Konishi, Kozo Ueda

    Research output: Contribution to journalArticle

    Abstract

    Negative correlations between inflation and aging are observed across developed nations. To understand such correlations from a politico-economic perspective, we embed the fiscal theory of the price level into an overlapping-generations model, with short-lived governments choosing tax rates and bond issues. Aging is deflationary when caused by an increase in longevity but inflationary when caused by a decline in birth rate. Over the past 40 years, aging has generated non-negligible deflationary pressure in Japan. Our analysis sheds new light on the controversy over the burden of national debt and the commitment effect of strategic debt creation.

    Original languageEnglish
    JournalJournal of Monetary Economics
    DOIs
    Publication statusPublished - 2019 Jan 1

    Fingerprint

    Fiscal
    Deflation
    National debt
    Fiscal theory of the price level
    Economics
    Government
    Burden
    Debt
    Inflation
    Japan
    Birth rate
    Overlapping generations model
    Tax rate

    Keywords

    • Deflation
    • Fiscal theory of the price level
    • Politico-economic equilibrium

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

    Cite this

    Aging and deflation from a fiscal perspective. / Katagiri, Mitsuru; Konishi, Hideki; Ueda, Kozo.

    In: Journal of Monetary Economics, 01.01.2019.

    Research output: Contribution to journalArticle

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