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Impact of Demographic Changes on Inflation and the Macroeconomy
Report

Impact of Demographic Changes on Inflation and the Macroeconomy

Jong-Won Yoon, Jinill Kim and Jungjin Lee
IMF, 2014
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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.

Take-Aways

  • In the short term, population changes will affect demand and consumption. Over the longer term, the impact of demographic shifts on the size of the workforce and its productivity will influence economic growth.
  • Around the world, falling fertility rates and rising life expectancies will mean declining and aging populations, particularly in developed countries.
  • National current account balances would deteriorate with a large older population that requires higher spending on pensions and health care, while tax revenue from a smaller workforce would impair budgets and fiscal stability.

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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