Macroeconomic Effects of Prelected Population Aging in Industrial Countries

January 1, 1990

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The effects of population aging are examined with the aid of a theoretical model and simulations of MULTIMOD. An older population will consume more of aggregate disposable income, require higher government expenditure, and decrease labor supply. These effects should raise real interest rates and lower the capital stock and output. Effects on current balances will depend on the relative speed and extent of aging. Simulations of projected demographic changes suggest that by 2025, real interest rates would be increased by several percentage points and net foreign assets increased in the United States, and decreased in Japan and Germany, as a result.

Subject: Aging, Expenditure, Financial services, Foreign exchange, National accounts, Population and demographics, Private savings, Real effective exchange rates, Real interest rates

Keywords: Aging, capital stock, consumption effect, consumption expenditure, consumption ratio, dependency ratio, equation estimate, Global, GNP ratio, government expenditure, government spending, net effect, Private savings, ratio of dependent, Real effective exchange rates, real interest rate rise, Real interest rates, result real GNP, saving rate, WP

Pages:
32
Volume:
1990
DOI:
https://doi.org/10.5089/9781451929553.001
Issue:
005
Series:
Working Paper No. 1990/005
Stock No:
WPIEA0051990
ISBN:
9781451929553
ISSN:
1018-5941

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Notes

Also published in Staff Papers, Vol. 37, No. 3, September 1990.

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