Why Aging Induces Deflation and Secular Stagnation
Abstract: We provide a quantitative theory of deflation and secular stagnation. In our lifecycle framework, an aging population puts persistent downward pressure on the price level, real interest rates, and output. A novel feature of our theory is that it also recognizes the reactions of government policy. The central bank responds to falling prices by reducing its policy nominal interest rate, and the fiscal authority responds by allowing the public debt–gross domestic product ratio to rise.
Status: Published in 2022
File(s): File format is application/pdf https://www.atlantafed.org/-/media/documents/research/publications/wp/2022/09/29/12--why-aging-induces-deflation-and-secular-stagnation.pdf
Provider: Federal Reserve Bank of Atlanta
Part of Series: FRB Atlanta Working Paper
Publication Date: 2022-09-29