Work detail

The Impact of Age Structure on Inflation - Example of Developing Countries

Author: Mgr. Khatia Zakaraia
Year: 2018 - winter
Leaders: MPhil Pavel Ryska Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 52
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/180277/
Abstract: Many countries in the world experience demographic transition – significant decrease of fertility rates and
increase share of the old population. The pace and characteristics of demographic shifts however are
individual for each country. At the same time these countries face low inflation rates or even deflation. In
this thesis I demonstrate how demographic changes are correlated with low inflation rates. I estimated
two different models – VAR and FEM for panel data using two samples of developing countries. The
primary argument of using two separate groups for estimating the same problem is robustness check,
whether all three imposed hypotheses will hold in any sample of the population. These hypotheses are -
first, deflation is positively correlated with increased share of the old population, second, low inflation in
developing economies has structural pattern due to demographic changes and third, deflation can be
forecastable if it is driven by demographic trends. Despite the heterogeneity of the results from PVAR and
FEM, a negative impact of aging population on inflation has been proved. Also estimation results support
our two hypotheses that low inflation if it is partially driven by aging structure changes, has structural
rather than cyclical characteristics and is predictable. Contribution of this thesis is investigation the impact
of age structure on inflation in developing countries since the rest of the existent studies examine the
same impact using advanced countries example.

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