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Title: Aging, Secular Stagnation and the Business Cycle

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: This paper studies the macroeconomic consequences of the aging US population in a lifecycle model with endogenous labor supply. I input to the model the trends in mortality and fertility observed between 1940 and 2015, and projected to 2070. The model accounts well for the decline in the real interest rate from 1980, slower output and productivity growth after 2009, and the fall in the employment-population ratio from 2000. I show that the aggregate consequences of demographic changes in the lifecycle model are well approximated by a representative agent RBC model with trends in productivity, the marginal utility of consumption, and the labor wedge. I incorporate pricing frictions and the zero lower bound on nominal interest rates into this framework and study the models business cycle implications. I find that when demographic mechanisms are taken into account, the zero lower bound is significantly more likely to bind between 2010 and 2025.

Url: http://econ.as.nyu.edu/docs/IO/44855/jmp.pdf

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Authors: Jones, Callum

Publisher: New York University

Data Collections: IPUMS USA

Topics: Fertility and Mortality, Labor Force and Occupational Structure

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