DP10887 Demographics and the Secular Stagnation Hypothesis in Europe
|Author(s):||Carlo A. Favero, Vincenzo Galasso|
|Publication Date:||October 2015|
|Keyword(s):||Europe, growth, real interest rates, stochastic mortality|
|Programme Areas:||International Macroeconomics and Finance|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10887|
Demographic trends in Europe do not support empirically the secular stagnation hypothesis. Our evidence shows that the age structure of population generates less long-term growth but positive real rates. Policies for growth become very important. We assess the relevance of the demographic structure for the choice between macro adjustements and structural reforms. We show that middle aged and elderly individuals have a more negative view of reforms, competitiveness and globalization than young. Our results suggest that older countries -- in terms of share of elderly people -- should lean more towards macroeconomic adjustments, whereas younger nations will be more supportive of structural reforms.