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The young, the old, and the restless: demographics and business cycle volatility

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Author Info
Nir Jaimovich
Henry E. Siu

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Abstract

We investigate the consequences of demographic change for business cycle analysis. We find that changes in the age composition of the labor force account for a significant fraction of the variation in business cycle volatility observed in the U.S. and other G7 economies. During the postwar period, these countries experienced dramatic demographic change, although details regarding extent and timing differ from place to place. Using panel-data methods, we exploit this variation to show that the age composition of the workforce has a large and statistically significant effect on cyclical volatility. We conclude by relating these findings to the recent decline in U.S. business cycle volatility. Using both simple accounting exercises and a quantitative general equilibrium model, we find that demographic change accounts for a significant part of this moderation.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 387.

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Date of creation: 2007
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Handle: RePEc:fip:fedmsr:387

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Keywords: Business cycles - Econometric models ; Demography;

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  1. Canadian Macro Study Group
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  5. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," NBER Working Papers 12537, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November. [Downloadable!] (restricted)
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  7. Alejandro Justiniano & Giorgio E. Primiceri, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," NBER Working Papers 12022, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Robert Shimer, 1999. "Why is the U.S. Unemployment Rate So Much Lower?," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 11-74 National Bureau of Economic Research, Inc. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kenneth S. Rogoff, 2006. "Impact of globalization on monetary policy," Proceedings, Federal Reserve Bank of Kansas City, pages 265-305. [Downloadable!]
  2. Marco Del Negro & Christopher Otrok, 2008. "Dynamic factor models with time-varying parameters: measuring changes in international business cycles," Staff Reports 326, Federal Reserve Bank of New York. [Downloadable!]
  3. Steven J. Davis & R. Jason Faberman & John Haltiwanger & Ron Jarmin & Javier Miranda, 2008. "Business Volatility, Job Destruction, and Unemployment," NBER Working Papers 14300, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. James Feigenbaum & Geng Li, 2008. "Lifecycle dynamics of income uncertainty and consumption," Finance and Economics Discussion Series 2008-27, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  5. James Feigenbaum & Geng Li, 2008. "A Nonparametric Characterization of Income Uncertainty over the Lifecycle," Working Papers 359, University of Pittsburgh, Department of Economics, revised Jul 2008. [Downloadable!]
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