Fertility, Money Holdings, and Economic Growth: Evidence from Ukraine

Abstract

This paper investigates declining fertility in Eastern Europe. By synthesizing recent theoretical findings, this paper identifies the channels through which the economy and fertility interact. The study uses a multi-variable vector autoregression model to determine the short- and the long-run responses of fertility to unemployment, money holdings, and output growth disturbances in the Ukrainian economy. We find that labor market conditions and households' money holdings are indeed important determinants of family decisions to bear and rear children. Unemployment disturbances and monetary incentives explain more than a third of fertility variations. The impulse response, variance decomposition, and sensitivity analyses suggest a wide range of policy options to address the issue of declining fertility in transition countries.

Keywords: fertility, unemployment, money holdings, economic growth, Ukraine

JEL Classification: J11, O10