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Demographics and the natural interest rate in the euro area

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dc.abstract.enWe investigate the impact of demographics on the natural rate of interest (NRI) in the euro area, with a particular focus on the role played by economic openness, migrations and pension system design. To this end, we construct a life-cycle model and calibrate it to match the life-cycle profiles from HFCS data. We show that population aging contributes significantly to the decline in the NRI, explaining about two-thirds of its secular decline between 1985 and 2030. Openness to international capital flows has not been important in driving the EA real interest rate as aging in Europe has been similar to that in the rest of the world so far. Of two possible pension reforms, only an increase in the retirement age can revert the downward trend on the equilibrium interest rate while a fall in the replacement rate would make the decline in NRI even deeper. The demographic pressure on the Eurozone NRI can be alleviated by increased immigration, but only to a small extent and with a substantial lag.
dc.affiliationUniwersytet Warszawski
dc.contributor.authorBrzoza-Brzezina, Michał
dc.contributor.authorKolasa, Marcin
dc.contributor.authorBielecki, Marcin
dc.date.accessioned2024-01-24T21:27:56Z
dc.date.available2024-01-24T21:27:56Z
dc.date.issued2020
dc.description.financePublikacja bezkosztowa
dc.description.number1
dc.description.sdgNoPoverty
dc.description.volume129
dc.identifier.doi10.1016/J.EUROECOREV.2020.103535
dc.identifier.issn0014-2921
dc.identifier.urihttps://repozytorium.uw.edu.pl//handle/item/104512
dc.identifier.weblinkhttps://www.sciencedirect.com/science/article/pii/S0014292120301665
dc.languageeng
dc.pbn.affiliationeconomics and finance
dc.relation.ispartofEuropean Economic Review
dc.relation.pages103535
dc.rightsClosedAccess
dc.sciencecloudnosend
dc.subject.enPopulation aging
dc.subject.enNatural interest rate
dc.subject.plPopulation aging
dc.subject.plNatural interest rate
dc.titleDemographics and the natural interest rate in the euro area
dc.typeJournalArticle
dspace.entity.typePublication