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Aging, migration and monetary policy in Poland

Author

Listed:
  • Marcin Bielecki

    (Narodowy Bank Polski)

  • Michał Brzoza-Brzezina

    (Narodowy Bank Polski)

  • Marcin Kolasa

    (SGH Warsaw School of Economics)

Abstract

Poland faces a particularly sharp demographic transition. The old-age dependency ratio is expected to increase from slightly above 20% in 2000 to over 60% in 2050. At the same time the country has recently witnessed a huge wave of immigration, mostly from Ukraine. In this paper we investigate how aging and migration will affect the Polish economy and what consequences these adjustments have for its monetary policy. Using a general equilibrium model with life-cycle considerations, we show that the decline in the natural rate of interest (NRI) due to demographic processes is substantial, amounting to more than 1.5 percentage points, albeit spread over a period of 40 years. The impact of migration flows is relatively small and cannot significantly alleviate the downward pressure on the NRI induced by populating aging. If the central bank is slow in learning about the declining NRI, an extended period of inflation running below the target is likely. In this case, the probability of hitting the zero lower bound (ZLB) becomes a major constraint on monetary policy while it could remain under control if the central bank uses demographic trends to update the NRI estimates in real time.

Suggested Citation

  • Marcin Bielecki & Michał Brzoza-Brzezina & Marcin Kolasa, 2021. "Aging, migration and monetary policy in Poland," NBP Working Papers 341, Narodowy Bank Polski.
  • Handle: RePEc:nbp:nbpmis:341
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    aging; monetary policy; migration; life-cycle models;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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