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Impact of Demographic Changes on Inflation and the Macroeconomy

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Impact of Demographic Changes on Inflation and the Macroeconomy

IMF,

5 min read
5 take-aways
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Evidence suggests that population trends will have far-reaching economic implications.

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Editorial Rating

7

Qualities

  • Analytical
  • Innovative

Recommendation

Economists Jong-Won Yoon, Jinill Kim and Jungjin Lee offer an advanced analysis of global demographic shifts and their economic effects. Declining birth rates and longer-lived populations, particularly in developed countries, will have serious macroeconomic implications. People’s transitions from young borrowers to middle-aged savers to elderly spenders influence factors such as growth in per capita GDP, a country’s ability to balance its budget and inflationary pressures. getAbstract recommends this scholarly research to policy makers, who seldom consider demographic changes when deliberating on economic strategy, inflation and interest rates. Perhaps they should.

Summary

Evidence suggests that population trends, particularly in developed nations, could have far-reaching economic implications. In the short term, demographic shifts and the expected economic behaviors associated with them – that is, young people borrow, the middle-aged save and the elderly spend – affect demand and consumption. Over the longer term, these shifts, which have an impact on the size of the workforce and its productivity, influence economic growth.

Around the world, fertility rates have been falling, from about five children per adult female...

About the Authors

Jong-Won Yoon is a former executive director at the International Monetary Fund, where Jungjin Lee is a senior research officer. Jinill Kim is a professor at Korea University.

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