Aging and Deflation from a Fiscal Perspective
AbstractNegative correlations between inflation and demographic aging have been observed across developed nations recently. To understand the phenomenon from a political economy perspective, we embed the fiscal theory of the price level into an overlapping-generations model. We suppose that short-lived governments successively choose income tax rates and bond issues, considering political influence from existing generations and the expected policy responses of future governments. Our analysis reveals that the effects of aging depend on its causes; aging is deflationary when caused by an unexpected increase in longevity, but is inflationary when caused by a decline in the birth rate. Our analysis also sheds new light on the traditional debate about the burden of national debt. Because of price adjustment, the accumulation of government debt imposes no burden on future generations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 13-E-13.
Date of creation: Dec 2013
Date of revision:
Contact details of provider:
Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103
Web page: http://www.imes.boj.or.jp/
More information through EDIRC
Deflation; Fiscal theory of the price level; Population aging; Redistribution across;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
This paper has been announced in the following NEP Reports:
- NEP-AGE-2014-01-10 (Economics of Ageing)
- NEP-ALL-2014-01-10 (All new papers)
- NEP-DGE-2014-01-10 (Dynamic General Equilibrium)
- NEP-MAC-2014-01-10 (Macroeconomics)
- NEP-PBE-2014-01-10 (Public Economics)
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.:
- Marco Bassetto, 2002.
"A Game-Theoretic View of the Fiscal Theory of the Price Level,"
Econometric Society, vol. 70(6), pages 2167-2195, November.
- Marco Bassetto, 2000. "A Game-Theoretic View of the Fiscal Theory of the Price Level," Econometric Society World Congress 2000 Contributed Papers 1492, Econometric Society.
- Marco Bassetto, 2001. "A game-theoretic view of the fiscal theory of the price level," Working Papers 612, Federal Reserve Bank of Minneapolis.
- Barro, Robert J, 1979.
"On the Determination of the Public Debt,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 940-71, October.
- Thomas J. Sargent & George J. Hall, 2010.
"Interest rate risk and other determinants of post WWII U.S. government debt/GDP dynamics,"
2010 Meeting Papers
208, Society for Economic Dynamics.
- George J. Hall & Thomas J. Sargent, 2011. "Interest Rate Risk and Other Determinants of Post-WWII US Government Debt/GDP Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 192-214, July.
- George J. Hall & Thomas J. Sargent, 2010. "Interest rate risk and other determinants of post WWII U.S. government debt/GDP dynamics," Working Papers 01, Brandeis University, Department of Economics and International Businesss School.
- George J. Hall & Thomas J. Sargent, 2010. "Interest Rate Risk and Other Determinants of Post-WWII U.S. Government Debt/GDP Dynamics," NBER Working Papers 15702, National Bureau of Economic Research, Inc.
- Eric M. Leeper & Todd B. Walker, 2011.
"Fiscal Limits in Advanced Economies,"
The Economic Society of Australia, vol. 30(1), pages 33-47, 03.
- R. Anton Braun & Tomoyuki Nakajima, 2011.
"Why Prices Don't Respond Sooner to a Prospective Sovereign Debt Crisis,"
KIER Working Papers
796, Kyoto University, Institute of Economic Research.
- R. Anton Braun & Tomoyuki Nakajima, 2012. "Why Prices Don't Respond Sooner to a Prospective Sovereign Debt Crisis," IMES Discussion Paper Series 12-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
- Barro, Robert J, 1974.
"Are Government Bonds Net Wealth?,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
- Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
- Cushing, Matthew J., 1999. "The indeterminacy of prices under interest rate pegging: The non-Ricardian case," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 131-148, August.
- Todd Walker & Eric Leeper & Troy Davig, 2010.
"Inflation and the Fiscal Limit,"
2010 Meeting Papers
837, Society for Economic Dynamics.
- Lange, Andreas & List, John A. & Price, Michael K., 2007. "A fundraising mechanism inspired by historical tontines: Theory and experimental evidence," Journal of Public Economics, Elsevier, vol. 91(9), pages 1750-1782, September.
- Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
- Zheng Song, 2011.
"The Dynamics of Inequality and Social Security in General Equilibrium,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 14(4), pages 613-635, October.
- Zheng Song, 2011. "Code and data files for "The Dynamics of Inequality and Social Security in General Equilibrium"," Computer Codes 09-145, Review of Economic Dynamics.
- Song, Zheng, 2008. "The Dynamics of Inequality and Social Security in General Equilibrium," MPRA Paper 10365, University Library of Munich, Germany.
- Willem H. Buiter, 2002. "The Fiscal Theory Of The Price Level: A Critique," Economic Journal, Royal Economic Society, vol. 112(481), pages 459-480, July.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken).
If references are entirely missing, you can add them using this form.