POPULATION DEPENDENCY AND INFLATION: A STUDY OF HIGH- AND UPPER-MIDDLE-INCOME COUNTRIES

Abstract

Researchers often study whether demographic change brings about inflationary tendencies in recent years. The decrease in the population at active working age and the dependency ratio that arises because of the increasing old age show an area where there is no consensus on whether it causes an inflatio-nary trend. In this context, we examined the trend of the young population dependency ratio, which represents the population aging and demographic change, and the tendency of the elderly population dependency ratio to affect inflation. The study conducted on 29 Upper Middle and High Income country economies in the period covering 1980-2020 used panel cointegration, panel ARDL and panel causality analysis methods. The main findings got from the study reveal that the elderly population dependency ratio has a deflationary effect in the short term, and the young population dependency has an inflationary effect in the long term. When examining the empirical studies in the literature, findings that show that population aging often leads to a deflationary process come to the fore. In other words, the fact that the age distribution of the total population accumulated from the active working age population to the elderly population shows the existence of a negative correlation between aging and inflation

Keywords

• key words: population dependency
• inflation
• cointgration
• panel data analysis