Open AccessPopulation Ageing and Price Level in Japan
Author(s) -
Chee-Hong Law
Publication year - 2021
Publication title -
malaysian journal of economic studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.173
H-Index - 11
ISSN - 1511-4554
DOI - 10.22452/mjes.vol58no2.8
Subject(s) - cointegration , ageing , economics , inflation (cosmology) , deflation , econometrics , population ageing , pairwise comparison , autoregressive model , distributed lag , granger causality , unit root test , population , unit root , statistics , mathematics , monetary economics , biology , demography , monetary policy , physics , sociology , theoretical physics , genetics
This paper estimates the cointegration between population ageing and inflation in Japan using the augmented autoregressive distributed lag model. The method provides a complete indication of cointegration and avoids false conclusions from a unit root test. Moreover, the transmission channel from ageing to the price level is investigated using the pairwise Granger causality. Based on the annual data from 1961 to 2018, a cointegration relationship is found, and the deflationary effect of ageing in Japan is confirmed. Additionally, the young dependency ratio inflates the price level in Japan. Lastly, ageing influences the price level via its impact on the labour supply.