Is ageing deflationary? Some evidence from OECD countries

Abstract

We present a theoretical and empirical discussion related to interconnections between inflation and ageing, providing some empirical results regarding the impact of ageing-related variables on inflation in a sample of OECD countries. According to the macroeconomics textbook ageing is generally inflationary, but a growing body of arguments can be identified to support the opposite impact. The simple empirical model is estimated via Fixed Effects (FE) and panel-corrected SE (PCSE), robust to groupwise heteroscedasticity and serial correlation. Generally, our results suggest that ageing exerts downward pressure on prices. The findings contradict the common view, but also do not fully conform with some of the recent hypotheses.

Keywords:

• ageing
• inflation
• deflation

JEL Classification:

• E2
• E5
• J1
• D7

Notes

¹ Outside of Japan, Faik (2012) showed that aging was deflationary in Germany over the period 1983–2009.