Article ID Journal Published Year Pages File Type
965970 Journal of Macroeconomics 2009 14 Pages PDF
Abstract
This paper aims to measure the contribution of an aging population to explain the real appreciation experienced by the Yen-US Dollar since 1980s. We develop a two-good overlapping-generation model of a semi-small open economy to highlight the link between the birth rate and the real exchange rate. In a creditor (debtor) country, an aging population causes a real exchange rate appreciation (depreciation) due to a positive (negative) wealth effect. Structural parameters are estimated by GMM using quarterly data between 1960 and 2001. Then, numerical simulations show that the long-run relationship between population growth and real exchange rate is negative between 1960 and 1971 and positive between 1971 and 2000. The decrease in population growth may account for a large part of the real appreciation experienced by the Yen/USD between 1971 and 2000.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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