Population Ageing and the Macroeconomy

53 Pages Posted: 31 Dec 2019

See all articles by Noemie Lisack

Noemie Lisack

European University Institute

Rana Sajedi

Bank of England

Gregory Thwaites

London School of Economics & Political Science (LSE) - London School of Economics

Date Written: December 2019

Abstract

We quantify the impact of demographic change on real interest rates, house prices and household debt in an overlapping-generations model. Falling birth and death rates across advanced economies can explain much of the observed fall in real interest rates and the rise in house prices and household debt. Since households maintain relatively high wealth levels throughout retirement, these trends will persist as population ageing continues. Countries ageing relatively slowly, like the US, will increasingly accumulate net foreign liabilities. The availability of housing as an alternative store of value attenuates these trends, while raising the retirement age has limited effects.

Keywords: demographics, ageing, natural interest rates, macroeconomic trends

JEL Classification: E21; E43; E13; J11

Suggested Citation

Lisack, Noemie and Sajedi, Rana and Thwaites, Gregory, Population Ageing and the Macroeconomy (December 2019). Banque de France Working Paper December 2019, WP #745 , Available at SSRN: https://ssrn.com/abstract=3511386 or http://dx.doi.org/10.2139/ssrn.3511386

Noemie Lisack (Contact Author)

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Rana Sajedi

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Gregory Thwaites

London School of Economics & Political Science (LSE) - London School of Economics ( email )

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