Aging and the Real Interest Rate in Japan: A Labor Market Channel

Shigeru Fujita and Ippei Fujiwara

No 21-23, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper explores a causal link between aging of the labor force and declining trends in the real interest rate in Japan. We develop a search/matching model that features heterogeneous workers with respect to their ages and firm-specific skills. Using the model, we examine the long-run implications of the sharp drop in labor force entry in the 1970s. We show that the changes in the demographic structure induce significant low-frequency movements in per capita consumption growth and the real interest rate. The model suggests that aging of the labor force accounts for 40 percent or more of the declines in the real interest rate observed between the 1980s and 2000s in Japan. We also examine the impacts of other long-term developments such as a slowdown of TFP growth and higher shares of female and non-regular workers.

Keywords: Aging; Real interest rate; Japan (search for similar items in EconPapers)
JEL-codes: E24 E43 (search for similar items in EconPapers)
Pages: 45
Date: 2021-06-08
New Economics Papers: this item is included in nep-age, nep-dge, nep-lab, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Aging and the real interest rate in Japan: A labor market channel (2023)
Working Paper: Aging and the Real Interest Rate in Japan: A Labor Market Channel (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:92541

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DOI: 10.21799/frbp.wp.2021.23

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