Cover; Contents; I. Introduction; Figures; 1. Changes in the Working-Age Population; II. Potential Effects of Aging on Inflation; 2. Aging and Expenditure Shares; III. Summary of the Global Integrated Monetary and Fiscal Model (GIMF); A. Household Sector; B. Production Sector; C. Financial Sector; D. International Dimensions and Spillovers; E. Fiscal and Monetary Policy; IV. Underlying Pressures of Aging on Inflation; Tables; 1. Savings Rate for Different Age Groups; 2. The Role of Demographic Factors in the Decline in Household Savings
3. Effects of Aging and Macroeconomic Policies on Selected Macroeconomic VariablesV. Policy Implications; 4. Effects of Policies on Selected Macroeconomic Variables; VI. Conclusions; References
Summary
"Japan has the most rapidly aging population in the world. This affects growth and fiscal sustainability, but the potential impact on inflation has been studied less. The authors use the IMF's Global Integrated Fiscal and Monetary Model (GIMF) and find substantial deflationary pressures from aging, mainly from declining growth and falling land prices. Dissaving by the elderly makes matters worse as it leads to real exchange rate appreciation from the repatriation of foreign assets. The deflationary effects from aging are magnified by the large fiscal consolidation need. Many of these factors will beset other advanced countries as well, but they find that deflation risk from aging is not inevitable as ambitious structural reforms and an aggressive monetary policy reaction can provide the offset."--Summary
