Demographics and the Secular Stagnation Hypothesis in Europe

50 Pages Posted: 20 Oct 2015

See all articles by Carlo A. Favero

Carlo A. Favero

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Vincenzo Galasso

University of Lugano; Centre for Economic Policy Research (CEPR)

Date Written: October 2015

Abstract

Demographic trends in Europe do not support empirically the secular stagnation hypothesis. Our evidence shows that the age structure of population generates less long-term growth but positive real rates. Policies for growth become very important. We assess the relevance of the demographic structure for the choice between macro adjustements and structural reforms. We show that middle aged and elderly individuals have a more negative view of reforms, competitiveness and globalization than young. Our results suggest that older countries -- in terms of share of elderly people -- should lean more towards macroeconomic adjustments, whereas younger nations will be more supportive of structural reforms.

Keywords: Europe, growth, real interest rates, stochastic mortality

JEL Classification: J11, J14

Suggested Citation

Favero, Carlo A. and Galasso, Vincenzo, Demographics and the Secular Stagnation Hypothesis in Europe (October 2015). CEPR Discussion Paper No. DP10887. Available at SSRN: https://ssrn.com/abstract=2676593

Carlo A. Favero (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://www.igier.unibocconi.it\favero

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vincenzo Galasso

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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