Macroeconomic Implications of Demographic Developments in the Euro Area

66 Pages Posted: 29 Aug 2006

See all articles by Angela Maddaloni

Angela Maddaloni

European Central Bank (ECB)

Alberto Musso

European Central Bank (ECB)

Philipp Rother

European Central Bank (ECB)

Melanie E. Ward-Warmedinger

European Central Bank (ECB); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Thomas Westermann

European Central Bank (ECB)

Date Written: August 2006

Abstract

This paper examines the macroeconomic consequences of future demographic trends for economic growth, financial markets and public finances. It shows that in the absence of reforms and responses by economic agents, the currently projected demographic trends imply a decline in average real GDP growth and a severe burden in terms of pay-as-you-go pension and health care systems. Population ageing will change the financial landscape, with a potentially larger role for financial intermediaries and asset prices. All this points to a need to closely monitor demographic change also from a monetary policy perspective. While population projections are surrounded by considerable uncertainty and the effects of demographic change tend to be drawn out, the magnitude of the potential effects calls for an early recognition of this issue. This paper provides some input to the examination of possible policy issues.

Suggested Citation

Maddaloni, Angela and Musso, Alberto and Rother, Philipp and Ward-Warmedinger, Melanie E. and Westermann, Thomas, Macroeconomic Implications of Demographic Developments in the Euro Area (August 2006). ECB Occasional Paper No. 51. Available at SSRN: https://ssrn.com/abstract=922678

Angela Maddaloni (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Alberto Musso

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Philipp Rother

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 0 (Phone)
+49 16 1344 6398 (Fax)

Melanie E. Ward-Warmedinger

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Thomas Westermann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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