In this paper we identify the effects of ageing on the relative price of nontradeables versus tradeables. We consider two cases. In a first specification, age effects only account for short-run dynamics. An alternative case allows for permanent age effects. Estimating the respective cases by means of an ECM on a panel of OECD countries we find significant effects of demographic composition on the relative prices, even after correcting for the standard explanatory variables. Simulations based on population projections of the UN show that ageing might substantially contribute to inflationary pressures in the near future.

Additional Metadata
Keywords age-specific effects, productivity differentials, relative price of nontradeables
JEL Price Level; Inflation; Deflation (jel E31), Open Economy Macroeconomics (jel F41), Demographic Trends and Forecasts (jel J11)
Persistent URL hdl.handle.net/1765/10481
Series Tinbergen Institute Discussion Paper Series
Journal Discussion paper / Tinbergen Institute
Citation
Bettendorf, L.J.H, & Dewachter, H.D.R. (2007). Ageing and the Relative Price of Nontradeables (No. TI 07-064/2). Discussion paper / Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/10481