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Age structure and consumer price inflation in Australia

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thesis
posted on 13.04.2022, 03:00 by David Corby

This thesis assesses the links between age structure and inflation in Australia. This is the first study, to our knowledge, to use disaggregated data to clarify the links between age structure and inflation. The aim is to shed light on some of the contentious issues in the research to date and to quantify the likely impact of Australia’s aging population. Faust and Wright (2013), in their comprehensive review of inflation forecasting, concluded that attention must be paid to improving the modelling of low frequency changes in inflation to reduce forecast errors. Age structure models have the potential to deliver this improvement and contribute to inflation forecasting. This thesis assesses the effect of different parts of the age structure on the common factors driving inflation and on disaggregated price inflation. It also estimates the relative impact of the young, middle and early old age cohorts on aggregate inflation, and uses these estimates to project inflation forward. The main finding is that age structure is important for inflation in Australia. All the analysis points to a consistent picture: younger age cohorts add to inflation, while late middle age and older cohorts reduce inflation. The mechanism of action is likely to be through changing relative demand and thus prices. The results suggest that the aging of the population will subtract from inflation significantly over the next ten years.

History

Table of Contents

Chapter 1: Introduction -- Chapter 2: Literature Review -- Chapter 3: Recent Consumer Price and Population Ratio Trends -- Chapter 4: Research Framework and Data Issues -- Chapter 5: Impact of Age Ratios on Factors Driving Inflation --Chapter 6: Age Structure and Disaggregated Prices -- Chapter 7: Relative Importance of Late Young, Late Middle and Early Old Cohorts -- Chapter 8: Conclusions – Appendices -- References

Awarding Institution

Macquarie University

Degree Type

Thesis MRes

Degree

Thesis (MRes), Macquarie University, Macquarie Business School

Department, Centre or School

Department of Economics

Year of Award

2019

Principal Supervisor

Jeffrey Sheen

Additional Supervisor 1

Ben Wang

Rights

Copyright disclaimer: https://www.mq.edu.au/copyright-disclaimer Copyright David Corby 2019.

Language

English

Extent

99 pages