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Economic Consequences of Population Aging in Japan: Effects through Changes in Demand Structure

Author

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  • Mitsuru Katagiri

    (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: mitsuru.katagiri@boj.or.jp))

Abstract

In this paper I investigate the effects of changes in demand structure caused by population aging on the Japanese economy using a multi-sector new Keynesian model with job creation/destruction. I consider upward revisions in forecast for the speed of Japanese population aging as unexpected shocks to its demand structure. I find that the shocks caused around 0.3 percent point deflationary pressure on year-to-year inflation, 0.3 to 0.4 percent point increase in unemployment rates, and 1.8 percent point decrease in real GDP from the early 1990s to the 2000s in Japan. I also find that the repetition of such upward revisions made those effects look more persistent.

Suggested Citation

  • Mitsuru Katagiri, 2012. "Economic Consequences of Population Aging in Japan: Effects through Changes in Demand Structure," IMES Discussion Paper Series 12-E-03, Institute for Monetary and Economic Studies, Bank of Japan.
  • Handle: RePEc:ime:imedps:12-e-03
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    File URL: http://www.imes.boj.or.jp/research/papers/english/12-E-03.pdf
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    References listed on IDEAS

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    11. repec:spr:lnecms:978-3-642-00146-8 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Kenji Nishizaki & Toshitaka Sekine & Yoichi Ueno, 2014. "Chronic Deflation in Japan," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(1), pages 20-39, January.
      • Kenji Nishizaki & Toshitaka Sekine & Yuichi Ueno & Yuko Kawai, 2013. "Chronic deflation in Japan," BIS Papers chapters,in: Bank for International Settlements (ed.), Globalisation and inflation dynamics in Asia and the Pacific, volume 70, pages 9-19 Bank for International Settlements.
    2. Derek Anderson & Dennis P Botman & Benjamin L Hunt, 2014. "Is Japan’s Population Aging Deflationary?," IMF Working Papers 14/139, International Monetary Fund.
    3. Eric M. Leeper, 2015. "Fiscal Analysis is Darned Hard," NBER Working Papers 21822, National Bureau of Economic Research, Inc.
    4. Fujita, Shigeru & Fujiwara, Ippei, 2016. "Declining Trends In The Real Interest Rate And Inflation: The Role Of Aging," Working Papers 16-29, Federal Reserve Bank of Philadelphia.
    5. Jong-Won Yoon & Jinill Kim & Jungjin Lee, 2014. "Impact of Demographic Changes on Inflation and the Macroeconomy," IMF Working Papers 14/210, International Monetary Fund.
    6. Keisuke Otsu & Katsuyuki Shibayama, 2016. "Population Aging and Potential Growth in Asia," Asian Development Review, MIT Press, vol. 33(2), pages 56-73, September.
    7. Kosuke Aoki & Naoko Hara & Maiko Koga, 2017. "Structural Reforms, Innovation and Economic Growth," Bank of Japan Working Paper Series 17-E-2, Bank of Japan.
    8. FUJITA Shigeru & FUJIWARA Ippei, 2015. "Declining Trends in the Real Interest Rate and Inflation: Role of aging," Discussion papers 15140, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Population Aging; Matching; Productivity; Deflation;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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