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Demographic Transition and Inflation in Emerging Economies

Author

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  • M. Koray Kalafatcilar
  • M. Utku Ozmen

Abstract

Demographic transition has been shaping the age structure of emerging countries, leading to huge swings between the working-age and the dependent population. Given the different labor income and consumption behaviors of these groups, the aggregate variables are affected even though personal behaviors remain unchanged. In this paper, we focus on one of these macroeconomic variables: inflation. First, we aim to clarify the inflationary impact by age cohort and try to measure the overall effect. Our empirical findings suggest that while the dependent population (net dis-savers) is associated with inflationary pressures, the working-age population (savers) is associated with deflationary pressures. Combining the demographic developments of last two decades with our empirical findings, we conclude that the shift of age distribution towards the working-age population has generated disinflationary effects in emerging countries and helped them leave behind the era of high-inflation.

Suggested Citation

  • M. Koray Kalafatcilar & M. Utku Ozmen, 2019. "Demographic Transition and Inflation in Emerging Economies," Working Papers 1931, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1931
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2019/19-31
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    Keywords

    Demography; Life-cycle behavior; Inflation;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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