Summary:
During the 1990s, the United States experienced a period of stable economic growth and moderate inflation, which was once considered a huge success in monetary policy. Likewise, China achieved an excellent economic growth rate from 2000 to 2010. Although economies worldwide were affected by the global subprime crisis, they successfully emerged from a V-shaped reversal in 2009, which also highlighted the effectiveness of monetary policy adjustments. After 2010, however, Europe and Japan began to implement unconventional monetary policy measures. While negative interest rates began to appear, the economic growth since then is still not optimistic. China has moderately eased its monetary policy many times since 2014, but its economic growth rate has been L-shaped. From the perspective of China and advanced economies, monetary policies have been relatively effective or even ineffective rather than effective. This paper explores why the effect of monetary policy varies so dramatically in different periods. In this paper, we argue that more attention should be paid to the relationship between population aging and the effect of monetary policy. As the population ages, the supply of labor is weakened and the aggregate supply curve is relatively steep. Due to the elderly population's low demand, the effectiveness of the expansionary monetary policy to drive aggregate demand is relatively weakened, which will lead to a higher price level. In addition, it is necessary to further examine the regional effect of monetary policy from the perspective of population aging. Due to regional characteristics and labor mobility, the age structure in provinces and cities has formed a regional imbalance. In addition, the response of economic activities to monetary policy changes also shows heterogeneity. This paper studies the channel through which the aging Chinese population affects the effects of monetary policy at the micro level. On the one hand, the aging population will reduce interest rates and the demand for social investments and social interest rate sensitivity. On the other hand, older people have a lower demand for goods with high dependence on loans, such as housing and durable goods, which leads to the lower demand for credit and lower external financing premiums. When the proportion of the older population is relatively large, it may lead to a decrease in the social demand for bank loans and hence a decrease in the sensitivity to bank credit. Using a macro time series data set for China from 1990 to 2021, this paper first investigates the effect of population age structure on monetary policy based on the SVAR benchmark model and IVAR expansion model. The 1994-2020 panel data for 30 provinces in China are then used to explain the impact of the relationship between the regional heterogeneity effects of China's monetary policy on population aging. Finally, the channel through which population aging weakens the effect of monetary policy is explored using micro data for A-share listed companies and commercial banks. The main conclusions are as follows. First, the results for both time series and panel data show that population aging weakens the effectiveness of quantitative-and price-based monetary policies. Second, the panel data results indicate that the demographic age structure is one of the reasons for the regional heterogeneity effects of monetary policy. Finally, the micro data for listed companies and commercial banks show that the aging population weakened interest rates and credit channels for monetary policy. This paper contributes to the literature in the following three aspects. First, in terms of the aging population and the effect of monetary policy, this paper focuses on China and empirically analyses the effect of monetary policies on economic growth and inflation from both quantitative and price perspectives. In addition, we use the IVAR methodology to improve the “two-step” method. Second, in terms of the regional heterogeneity effects of monetary policy, population aging is considered as an explanation. Finally, in terms of the transmission channel of the monetary policy effect affected by an aging population, this paper empirically investigates the influence of demographic age structure changes on interest rate and credit channels at the micro level.
翟光宇, 王超, 姜美君. 人口老龄化、货币政策效果及传导渠道[J]. 金融研究, 2023, 514(4): 1-18.
ZHAI Guangyu, WANG Chao, JIANG Meijun. Population Aging and the Effectiveness of Monetary Policy and Transmission Channels. Journal of Financial Research, 2023, 514(4): 1-18.
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