Summary of Age and Inflation

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Economists have a number of theories about why inflation flares up during certain periods and dies down in others. While age trends within a population are seldom-explored causes of inflation, new evidence suggests that they may be important drivers. Economists Mikael Juselius and Elöd Takáts find that a large working-age population correlates with disinflationary periods, while inflationary times occur when the young and old dominate. So as many of the world’s major economies age, inflation may make a comeback. getAbstract recommends this important article to economists and others interested in how age-related trends might affect future prices.

About the Authors

Mikael Juselius is a senior economist at the Bank of Finland. Elöd Takáts is a senior economist at the Bank for International Settlements.

 

Summary

Individuals are most likely to borrow in their youth, save during their working years and subsist on savings when they are old. If this holds true, inflationary pressure rises when there are lots of young and old people, who consume but don’t necessarily produce much. On the other hand, prices fall when large numbers of working-age individuals produce more than they consume. Data show that from 1955 to 1975, young baby boomers raised US inflation by an estimated six percentage points. Between 1975 and 1990, when they entered the workforce, inflation declined five percentage points.

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