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Population age structure and real exchange rates in the OECD

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  • Andreas Andersson
  • Par Osterholm

Abstract

Macroeconomic theory predicts that variations in population cohort sizes will lead to demographically induced real exchange rate movements. While such effects have previously been established for individual countries, this paper exploits cross-sectional time series data to test the prediction for a larger number of economies. A reduced form model with population age shares as regressors is estimated using a panel of 25 OECD countries between 1971 and 2002. The results confirm that demographic structure has significant explanatory power for the real exchange rate and the estimated relationship supports age structure effects in accordance with the life cycle hypothesis.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 20 (2006)
Issue (Month): 1 ()
Pages: 1-18

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Handle: RePEc:taf:intecj:v:20:y:2006:i:1:p:1-18

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Keywords: Demography; real exchange rates; panel data; forecasts;

References

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Cited by:
  1. Kamrul Hassan & Ruhul Salim, 2011. "The linkage between relative population growth and purchasing power parity: Cross country evidence," International Journal of Development Issues, Emerald Group Publishing, vol. 10(2), pages 154-169, July.
  2. Aloy, Marcel & Gente, Karine, 2009. "The role of demography in the long-run Yen/USD real exchange rate appreciation," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 654-667, December.

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