A Theoretical and Empirical Analysis of the Implications of Aging Population on Macroeconomic Variables

Kristine Gevorgyan

Doctoral thesis

Abstract:

Disertační práce je souborem tří akademických článků na téma stárnutí populace a jeho vliv na určité makroekonomické proměnné. Vysvětluje teoreticky pomoci OLG modelů a empiricky vztah mezi demografií a cenou nemovitosti, reálnou úrokovou mírou a běžného účtu platební bilance. Výsledky z výzkumu ukazují, že demografické změny mají na tyto proměnné významný dopad. Cílem disertační práce je poskytnout jednotný rámec pro pochopení a analýzu role demografie, zejména stárnutí populace, na vybrané klíčové makroekonomické veličiny.

Abstract:

The dissertation thesis is a collection of three academic articles on the topic of aging population and its effect on certain macroeconomic variables. It explains theoretically and empirically the relationship between demographics and house prices, real interest rate, and current account balance. The combined evidence of the research shows that demographic shifts have a significant impact on these variables. The goal of the dissertation thesis is to provide a unied framework for understanding and analyzing the role of demographics, and especially aging population on some key macroeconomic variables. At first, the dissertation looks at house price movements due to demographic shifts. Naturally, the dissertation next focuses on two closely related subjects, the real interest rates and the current account imbalance. The first paper tests the idea that major demographic shifts can aeffect house prices. It first builds an overlapping generation model and analytically solves for the equilibrium price of the asset. The model predicts that economies with a higher fraction of old people in the overall population have lower house prices. It then empirically tests this hypothesis using data on house prices and demographic variables from the OECD. The main finding is that if population growth increases by one percentage point house price growth increases by 1.4 percentage points. The second paper asks if demographic changes affect the real interest rates? It shows both theoretically and empirically that an increase in the population growth raises the real interest rate. It solves analytically for the equilibrium real interest rate using a three-period overlapping generation model. The model confirms that when an economy is experiencing a higher share of younger people, the real interest rate increases. The paper empirically tests this hypothesis using cross-country regressions with data on the real interest rates and demographic variables from the OECD. It finds that one percentage point increase in a country's population growth increases the real interest rate by 0.55 percentage points. Finally, the final paper in the thesis shows that international current account imbalances occur to a large degree because of major demographic shifts. It first builds a small open economy model with investment and studies the current account response to a demographic change. According to the model, an economy with a higher population growth demands more funds from world capital markets and experiences a current account decit. Data on current account balances and demographics from the OECD confirm the model's hypothesis.If population growth increases by one percentage point the current account as a fraction of gross domestic product decreases by 0.7 percentage points.

Keywords

stárnutí populace, ceny nemovitostí, reálná úroková míra, běžný účet platební bilancde

Keywords

Aging Population, Current Account Balance, House Prices, Real Interest Rate

Language used: English

Date on which the thesis was submitted / produced: 14. 1. 2022

Thesis defence

• Date of defence: 7. 3. 2022
• Supervisor: Karel Brůna
• Reader: Luboš Smutka, Sagi Akron

Vysoká škola ekonomická v Praze

Doctoral programme / field:
Finance a účetnictví / Finance