Macroeconomic Effects of Prelected Population Aging in Industrial Countries

IMF Working Papers, January 1, 1990

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Macroeconomic Effects of Prelected Population Aging in Industrial Countries

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Bibliographic details

• Authors: Paul R Masson, Ralph W. Tryon
• Published: January 1, 1990
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451929553.001

Summary

• The effects of population aging are examined with the aid of a theoretical model and simulations of MULTIMOD.
• An older population will:
  • consume more of aggregate disposable income,
  • require higher government expenditure,
  • decrease labor supply.
• These effects should:
  • raise real interest rates,
  • lower the capital stock and output.
• Effects on current balances will depend on the relative speed and extent of aging.
• Simulations of projected demographic changes suggest that by 2025:
  • real interest rates would be increased by several percentage points,
  • net foreign assets increased in the United States,
  • net foreign assets decreased in Japan and Germany.

Major findings and projections

• Older population behavior and fiscal demands:
  • Higher consumption share of aggregate disposable income.
  • Higher government expenditure associated with aging.
  • Reduced labor supply resulting from demographic shifts.
• Macroeconomic consequences identified:
  • Upward pressure on real interest rates.
  • Declines in capital stock and output.
  • Heterogeneous effects on current account and net foreign asset positions depending on country and timing of aging.
• Simulation outcome highlighted:
  • By 2025, real interest rates rise by "several percentage points" (phrase preserved as in source).
  • Net foreign assets: increase in the United States; decrease in Japan and Germany.

Policy-relevant implications (as conveyed by the study)

• Population aging implies fiscal and macroeconomic adjustments are likely needed to address:
  • increased consumption demands among older cohorts,
  • higher government spending requirements,
  • lower labor supply and its effects on output and capital accumulation.
• The timing and speed of demographic change are critical for current balance and external position outcomes.

Publication and metadata

• Title: Macroeconomic Effects of Prelected Population Aging in Industrial Countries
• Authors: Paul R Masson, Ralph W. Tryon
• Date: January 1, 1990
• Series: Working Paper No. 1990/005
• Issue: 005
• Volume: 1990
• Pages: 32
• DOI: https://doi.org/10.5089/9781451929553.001
• Stock No: WPIEA0051990
• ISBN: 9781451929553
• ISSN: 1018-5941
• Subjects: Aging, Expenditure, Financial services, Foreign exchange, National accounts, Population and demographics, Private savings, Real effective exchange rates, Real interest rates
• Keywords: Aging, capital stock, consumption effect, consumption expenditure, consumption ratio, dependency ratio, equation estimate, Global, GNP ratio, government expenditure, government spending, net effect, Private savings, ratio of dependent, Real effective exchange rates, real interest rate rise, Real interest rates, result real GNP, saving rate, WP

Summary derived from the IMF Working Paper landing page for "Macroeconomic Effects of Prelected Population Aging in Industrial Countries".