Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82907
Authors: 
Bruér, Mattias
Year of Publication: 
2002
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2002:4
Abstract: 
Time series regressions indicate that age structure has significant forecasting power on Swedish inflation. The results agree with a Phillips-Okun framework, assuming that the demographic composition affects productivity. The relative age effects are also relatively well in accordance with what could be expected from life-cycle theory. In the forecasting exercise the age model outperforms the estimated benchmarks; i.e. two autoregressive models, an ARIMA and the 2 per cent forecast corresponding to the stipulated inflation target. The age model is also considerably better than the consensus forecasts and it is equal in merit with a general VAR model that has been used by the Riksbank (Bank of Sweden). We conclude that the source of information embedded in the age shares is something the Riksbank should consider when conducting monetary policy. When extending the forecasting horizon, the age model predicts a significant rise in the inflationary pressure after 2005 when the big baby boom cohort of the 1940s enters retirement.
Subjects: 
Inflation forecasting
Demography
Life-cycle hypothesis
JEL: 
E31
J10
J11
Document Type: 
Working Paper

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