Long-Run Trends in Demographics, Income Inequality, and the Natural Rate of Interest: Further Evidence
19 Pages Posted: 3 Nov 2021
Date Written: November 2, 2021
Trends in demographics and income inequality have been considered as explanations for the drift in the natural rate of interest. The conclusion reached so far is that, while time-series evidence is not decisive, microeconomic evidence challenges demographics (Mian, Straub, and Sufi, 2021). We confirm, via cointegration analysis and estimation of interest rate rules, the difficulties of finding decisive evidence in a time-series approach. However, further consideration of the microeconomic evidence not only does not challenge the demographic interpretation of the trend, but also suggests that the rise in income inequality is partially explained by demographics.
Keywords: Monetary Policy Rule, Secular Trends, Demographics, Income Inequality
JEL Classification: E43, E52, G12
Suggested Citation: Suggested Citation