This column argues that these changes will have profound and negative effects on economic growth. This implies that negative real interest rates are not the new normal, but rather an extreme artefact of a series of trends, several of which are coming to an end. By 2025, real interest rates should have returned to their historical equilibrium value of around 2.5–3%.
Introduction
Our history is our database. When seeking to peer dimly into the future, our normal response is to examine what happened in (similar) past episodes and then to extrapolate those outcomes into the future. This assumption, that the future will mimic the past, is hard-wired into almost all our forecasting exercises, from the most simple to the econometrically and technically most complex.
Yet this assumption, that the future will be like the past, is perhaps more questionable now than for decades, at least in the economic sphere. All around the world we stand on the cusp of a dramatic shift in the structure of our populations, the ageing of our people. Only Japan has yet decisively entered into this difficult new world, and its experience has been affected by some special factors; it coincided with a financial crisis and occurred while its neighbours in Asia were still benefitting from a population ‘sweet spot’, with their ratio of workers to dependents (otherwise known as the ‘support ratio’) rising. So its experience is not necessarily a reliable guide to the future either.
Future demographic changes
In the standard demographic transition process, outlined by Ronald Lee in his paper at this year’s Jackson Hole Conference (Lee 2014), with improving living and medical conditions,...
More:
www.voxeu.org/article/demography-and-economics-look-past-past://
www.voxeu.org/article/demography-and-economics-look-past-past
Introduction
Our history is our database. When seeking to peer dimly into the future, our normal response is to examine what happened in (similar) past episodes and then to extrapolate those outcomes into the future. This assumption, that the future will mimic the past, is hard-wired into almost all our forecasting exercises, from the most simple to the econometrically and technically most complex.
Yet this assumption, that the future will be like the past, is perhaps more questionable now than for decades, at least in the economic sphere. All around the world we stand on the cusp of a dramatic shift in the structure of our populations, the ageing of our people. Only Japan has yet decisively entered into this difficult new world, and its experience has been affected by some special factors; it coincided with a financial crisis and occurred while its neighbours in Asia were still benefitting from a population ‘sweet spot’, with their ratio of workers to dependents (otherwise known as the ‘support ratio’) rising. So its experience is not necessarily a reliable guide to the future either.
Future demographic changes
In the standard demographic transition process, outlined by Ronald Lee in his paper at this year’s Jackson Hole Conference (Lee 2014), with improving living and medical conditions,...
More:
www.voxeu.org/article/demography-and-economics-look-past-past://
www.voxeu.org/article/demography-and-economics-look-past-past
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FY360° by Finyear (précédemment Financial Year Links) est un service Finyear dont la mission est de vous faire gagner du temps et de vous tenir informés. Notre équipe suit les actus pertinentes, les organise, créé un lien vers les sources originales et vous les communique sur le site Finyear et dans la newsletter quotidienne.
FY360° by Finyear n'est pas un produit fini : faites-nous savoir ce que vous en pensez et si vous avez une suggestion, une remarque, ou une source que nous devrions suivre, écrivez-nous.
FY360° by Finyear (ex Financial Year Links) is a Finyear service on a mission to save you time and keep you smart. Our team follows the relevant news, summarize it, link to the original sources and deliver it on the Finyear website and in the daily newsletter.
FY360° by Finyear is not a finished product: please let us know what you think and if you have a suggestion, a complaint, or something we should link to, email us.
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