## Shock from Graying: Is the Demographic Shift Weakening Monetary Policy Effectiveness

_IMF Working Papers, September 6, 2013_

## Source details

**Canonical URL:** [Shock from Graying: Is the Demographic Shift Weakening Monetary Policy Effectiveness](https://www.imf.org/en/publications/wp/issues/2016/12/31/shock-from-graying-is-the-demographic-shift-weakening-monetary-policy-effectiveness-40916)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/shock-from-graying-is-the-demographic-shift-weakening-monetary-policy-effectiveness-40916/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/shock-from-graying-is-the-demographic-shift-weakening-monetary-policy-effectiveness-40916/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/shock-from-graying-is-the-demographic-shift-weakening-monetary-policy-effectiveness-40916/bundle-manifest.json)

## Bibliographic details
- Authors: Patrick A. Imam
- Published: September 6, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475598070.001

---

### Abstract and Main Findings
- Empirical evidence indicates that, in advanced economies, changes in monetary policy have a more benign impact on the economy compared to the past because inflation expectations are better anchored and inflation is less responsive to variation in unemployment.
- The paper examines whether the demographic shift to an older society can help explain the observed moderation in monetary policy effectiveness.
- Bayesian estimation for the U.S., Canada, Japan, U.K., and Germany confirms a weakening of monetary policy effectiveness over time with regards to unemployment and inflation.
- A panel co-integration relationship between ageing and a weakening of monetary policy is established.
- Dynamic panel OLS techniques are used to attribute the weakening of monetary policy effectiveness to demographic changes.
- The paper concludes with policy implications.

### Transmission Channels and Conceptual Points
- The study clarifies potential transmission channels that could explain why monetary policy effectiveness may moderate in graying societies.
- Key conceptual elements include interactions among: aging/demographic shift, monetary transmission mechanisms, inflation expectations, unemployment responses, and credit/financial-market channels.

### Methodology
- Econometric approaches used:
  - Bayesian estimation techniques applied to five advanced economies: the U.S., Canada, Japan, U.K., and Germany.
  - Panel co-integration analysis to test long-run relationships between ageing and monetary policy effectiveness.
  - Dynamic panel OLS techniques to attribute weakening of policy effectiveness to demographic changes.

### Policy Implications
- The paper draws policy implications from the findings that demographic changes—specifically ageing—are associated with a weakening of monetary policy effectiveness on unemployment and inflation.
- Policy recommendations are provided in the paper (summary notes the conclusion with policy implications but does not reproduce the detailed recommendations).

### Publication and Metadata
- Author: Patrick A. Imam
- Publication date: September 6, 2013
- Series: Working Paper No. 2013/191
- Volume: 2013
- Issue: 191
- Pages: 38
- DOI: https://doi.org/10.5089/9781475598070.001
- Stock No: WPIEA2013191
- ISBN: 9781475598070
- ISSN: 1018-5941
- Subjects: Aging, Credit, Inflation, Labor, Money, Population and demographics, Prices, Unemployment
- Keywords: Aging, central bank, Credit, Demographic shift, effectiveness of monetary policy, financial crisis, Global, Inflation, inflation expectation, interest rate, life-cycle model, monetary policy change, monetary policy effectiveness, monetary policy shock, monetary transmission mechanism, Unemployment, WP

*IMF Working Papers — Patrick A. Imam, "Shock from Graying: Is the Demographic Shift Weakening Monetary Policy Effectiveness", Working Paper No. 2013/191 (September 6, 2013).*

---

## Content in this bundle

- **_wp13191**
  - [_wp13191 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp13191.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp13191 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp13191.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/shock-from-graying-is-the-demographic-shift-weakening-monetary-policy-effectiveness-40916_