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Aging, Migration and Monetary Policy in Poland

Author

Listed:
  • Marcin Bielecki
  • Michał Brzoza-Brzezina
  • Marcin Kolasa

Abstract

Poland faces a particularly sharp demographic transition. The old-age dependency ratio is expected to increase from just above 20% in 2000 to over 60% in 2050. At the same time, the country has recently witnessed a huge wave of immigration, mostly from Ukraine. In this paper, we investigate how aging and migration will affect the Polish economy and what consequences these adjustments have for monetary policy. Using a general equilibrium model with life-cycle considerations, we show that the decline in the natural rate of interest (NRI) due to demographic processes is substantial, amounting to around 1.5 percentage points, albeit spread over a period of 40 years. The impact of migration flows is relatively small and cannot significantly alleviate the downward pressure on the NRI induced by populating aging. If the central bank is slow in learning about the declining NRI, an extended period of inflation running below the target is likely. In this case, the probability of hitting the zero lower bound (ZLB) becomes a major constraint on monetary policy, while it could remain under control if the central bank uses demographic trends to update the NRI estimates in real time.

Suggested Citation

  • Marcin Bielecki & Michał Brzoza-Brzezina & Marcin Kolasa, 2022. "Aging, Migration and Monetary Policy in Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 5-30.
    • Handle: RePEc:sgh:gosnar:y:2022:i:1:p:5-30
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    More about this item

    Keywords

    aging; migration; monetary policy; life-cycle models;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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