TY - JOUR
T1 - Aging and deflation from a fiscal perspective
AU - Katagiri, Mitsuru
AU - Konishi, Hideki
AU - Ueda, Kozo
N1 - Funding Information:
An earlier version of this paper was prepared in part while Konishi was a visiting scholar at the Institute for Monetary and Economic Studies, Bank of Japan. We thank the editor (Yuriy Gorodnichenko), anonymous referee, Toni Braun, Giuseppe Fiori, Philipp Harms, Burkhard Heer, Selo Imrohoroglu, Eric Leeper, and other conference and seminar participants at the Bank of Finland/CEPR, the Bank of Japan, Bundesbank, Canon Institute, CEF, EEA-ESEM, European Public Choice Society Meeting, and Paris School of Economics. The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan. Konishi and Ueda are grateful for the financial support from the Japan Society for the Promotion of Science (#25380373for Konishi and #30708558 for Ueda) and the Ministry of Education, Culture, Sports, Science and Technology (Strategic Research Foundation at Private Universities, S1411025).
Publisher Copyright:
© 2019 The Authors
PY - 2020/5
Y1 - 2020/5
N2 - 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.
AB - 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.
KW - Deflation
KW - Fiscal theory of the price level
KW - Politico-economic equilibrium
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U2 - 10.1016/j.jmoneco.2019.01.018
DO - 10.1016/j.jmoneco.2019.01.018
M3 - Article
AN - SCOPUS:85061591123
SN - 0304-3932
VL - 111
SP - 1
EP - 15
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
ER -