Hostname: page-component-8448b6f56d-dnltx Total loading time: 0 Render date: 2024-04-23T23:26:57.912Z Has data issue: false hasContentIssue false
  • English
  • Français

A NOTE ON POPULATION AGING AND EFFECTIVENESS OF FISCAL POLICY

Published online by Cambridge University Press:  23 December 2020

Hiroaki Miyamoto  and
Naoyuki Yoshino
Hiroaki Miyamoto*
Affiliation:
Tokyo Metropolitan University
Naoyuki Yoshino
Affiliation:
Keio University
*
Address correspondence to: Hiroaki Miyamoto, Tokyo Metropolitan University, 1-1 Minami-Osawa, Hachioji-shi, Tokyo, 192-0397, Japan. e-mail: hmiyamoto@tmu.ac.jp
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines how population aging affects the output effect of a government spending shock by using a panel data of OECD countries. The government spending shock is identified as a forecast error of government spending, and its output effect is estimated by using the local projection method. We find that population aging affects the output effect of the government spending shock. While in non-aging economies, government spending shock increases output significantly in both short- and medium-terms, in aging economies, output responses are not statistically significant.

Keywords

Population AgingFiscal PolicyFiscal Multipliers
Type
Notes
Information
Macroeconomic Dynamics , Volume 26 , Issue 6 , September 2022 , pp. 1679 - 1689
Copyright
© Cambridge University Press 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank William A. Barnett (the editor), Francesco Zanetti (the coeditor), and two anonymous referees for their insightful comments and suggestions.

References

REFERENCES

Abiad, A., Davide, F. and Topalova, P. (2016) The macroeconomic effects of public investment: Evidence from advanced economies. Journal of Macroeconomics 50, 224–240.10.1016/j.jmacro.2016.07.005CrossRefGoogle Scholar
Auerbach, A. J. and Gorodnichenko, Y. (2012) Measuring the output responses to fiscal policy. American Economic Journal: Economic Policy 4(2), 1–27.Google Scholar
Auerbach, A. J. and Gorodnichenko, Y. (2013) Fiscal multipliers in recession and expansion. In: Alesian, A. and Giavazzi, F. (eds.), Fiscal Policy After the Financial Crisis, pp. 63–98. University of Chicago Press.10.7208/chicago/9780226018584.003.0003CrossRefGoogle Scholar
Basso, H. S. and Rachedi, O. (2020) The young, the old, and the government: Demographics and fiscal multipliers. American Economic Journal: Macroeconomics (Forthcoming).10.1257/mac.20190174CrossRefGoogle Scholar
Blanchard, O. and Perotti, R. (2002) An empirical characterization of the dynamic effects of changes in government spending and taxes on output. The Quarterly Journal of Economics 117(4), 1329–1368.10.1162/003355302320935043CrossRefGoogle Scholar
Conesa, J. C. and Kehoe, T. J. (2018) An introduction to the macroeconomics of aging. The Journal of the Economics of Ageing 11, 1–5.10.1016/j.jeoa.2018.03.002CrossRefGoogle Scholar
Ghassibe, M. and Zanetti, F. (2019) State Dependence of Fiscal Multipliers: The Source of Fluctuations Matters. Mimeo: University of Oxford.Google Scholar
Herbst, E. P. and Johannsen, B. K. (2020) Bias in Local Projections. Finance and Economics Discussion Series 2020-010. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2020.010.Google Scholar
Honda, J. and Miyamoto, H. (2020) Would population aging change the output effects of fiscal policy? IMF Working Paper No. 20/92.Google Scholar
Ilzetzki, E., Mendoza, E. G. and Végh, C. A. (2013) How big (small?) are fiscal multipliers? Journal of Monetary Economics 60(2), 239–254.10.1016/j.jmoneco.2012.10.011CrossRefGoogle Scholar
Imam, P. A. (2013) Shock from graying: Is the demographic shift weakening monetary policy effectiveness. IMF Working Paper No. 13/191.10.5089/9781475598070.001CrossRefGoogle Scholar
Jordà, Ò. (2005) Estimation and inference of impulse responses by local projections. American Economic Review 95(1), 161–182.10.1257/0002828053828518CrossRefGoogle Scholar
Ramey, V. and Zubairy, S. (2018) Government spending multipliers in good times and in bad: Evidence from US historical data. Journal of Political Economy 126(2), 850–901.10.1086/696277CrossRefGoogle Scholar
Wong, A. (2019) Refinancing and the Transmission of Monetary Policy to Consumption. Mimeo.Google Scholar
Yoshino, N. and Miyamoto, H. (2017) Declined effectiveness of fiscal and monetary policies faced with aging population in Japan. Japan and the World Economy 42, 32–44.10.1016/j.japwor.2017.06.002CrossRefGoogle Scholar