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Will ageing lead to a higher real exchange rate for the Netherlands?

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  • Casper van Ewijk

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  • Maikel Volkerink

Abstract

Long-term projections for the Netherlands indicate that demand for nontradables – e.g. health care services – will increase relative to supply due to population ageing. If this leads to higher future real exchanges rates this will erode the return of the savings currently made to prepare for ageing. This paper explores the magnitude of potential price effects using a modified version of the ‘two country, four commodity framework’ developed by Obstfeld and Rogoff (2005) to explore the exchange rate effects of the balance of payments reversal in the US. When these price effects are substantial, this may have serious consequences for policies to enhance national saving in the Netherlands.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 197.

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Date of creation: Dec 2011
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Handle: RePEc:cpb:discus:197

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  1. Iscan Talan, 2010. "How Much Can Engel's Law and Baumol's Disease Explain the Rise of Service Employment in the United States?," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 10(1), pages 1-43, September.
  2. Kenneth Rogoff & William Brainard & George Perry, . "Global Current Account Imbalances and Exchange Rate Adjustments," Working Paper 33687, Harvard University OpenScholar.
  3. Leon Bettendorf & A. Horst & N. Draper & C. Ewijk & R. Mooij & H. Rele, 2011. "Ageing and the Conflict of Interest Between Generations," De Economist, Springer, Springer, vol. 159(3), pages 257-278, September.
  4. Maurice Obstfeld & Kenneth Rogoff, 2005. "The unsustainable U.S. current account position revisited," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Feb.
  5. Baldwin, Richard & Robert-Nicoud, Frédéric, 2014. "Trade-in-goods and trade-in-tasks: An integrating framework," Journal of International Economics, Elsevier, Elsevier, vol. 92(1), pages 51-62.
  6. Axel Boersch-Supan, 2001. "Labor Market Effects of Population Aging," NBER Working Papers 8640, National Bureau of Economic Research, Inc.
  7. Donghoon Lee & Kenneth I. Wolpin, 2004. "Intersectoral Labor Mobility and the Growth of the Service Sector," PIER Working Paper Archive 04-036, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, Elsevier, vol. 45(1), pages 69-106, February.
  9. Bart Hobijn & David Lagakos, 2003. "Social security and the consumer price index for the elderly," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 9(May).
  10. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 797-818, September.
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Cited by:
  1. Max Groneck & Christoph Kaufmann, 2014. "Relative Sectoral Prices and Population Ageing: A Common Trend," Working Paper Series in Economics, University of Cologne, Department of Economics 69, University of Cologne, Department of Economics.
  2. Igor Fedotenkov & Irena Mikolajun, 2013. "Migration and Welfare," International Advances in Economic Research, Springer, Springer, vol. 19(1), pages 71-73, February.

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