Why Aging Induces Deflation and Secular Stagnation

R. Anton Braun and Daisuke Ikeda
Working Paper 2022-12
September 2022

Full text Adobe PDF file format


We provide a quantitative theory of deflation and secular stagnation. In our lifecycle framework, an aging population puts persistent downward pressure on the price level, real interest rates, and output. A novel feature of our theory is that it also recognizes the reactions of government policy. The central bank responds to falling prices by reducing its policy nominal interest rate, and the fiscal authority responds by allowing the public debt–gross domestic product ratio to rise.

JEL classification: E52, E62, G51, D15

Key words: monetary policy, lifecycle, portfolio choice, secular stagnation, nominal government debt, aging, Tobin effect, fiscal policy, deflation


The authors wish to thank conference and seminar participants at Keio University, the Canon Institute for Global Studies 2021 end of year conference, the Bank of Japan, the 2022 National Bureau of Economic Research summer institute, the University of Mannheim, and the 2022 annual Wien Macroeconomics Workshop for their helpful comments. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta, the Federal Reserve System, or the Bank of Japan. Any remaining errors are the authors' responsibility.

Please address questions regarding content to R. Anton Braun, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree St. NE, Atlanta, GA 30309; or Daisuke Ikeda, Bank of Japan.

To receive e-mail notifications about new papers, subscribe. Under "Publications" select "Working Papers."