Population aging and the negative effect on real interest rates

Population aging and the negative effect on real interest rates

Italy, as recently communicated by ISTAT (the national statistics institute), has for decades now been on a long-term path where birth and mortality rates continue to decrease. The excess mortality brought about by the pandemic, compared to the expected level, was not in itself capable of slowing down the growth of aging, which, in fact, is continuing to increase the average age of the population between the beginning of 2020 and the beginning of 2021, from 45.7 years to 46 years. The central theme of the analysis concerns the so-called dependency ratio.

The percentage ratio between the non-active population

The active population (15-64 years). This ratio has been constantly increasing in recent years, in fact according to United Nations projections, which also consider possible net immigration flows, in the euro Turkey Phone Number List area for every 10 people of working age there will be over 4 people over the age of 65 already in 2030, compared to a proportion of around 2 in 10 in the 1980s. The data concerns the EU but in any case the result is in line with that of the most developed countries as a whole. Demographic dynamics such as the aging of the population are a structural factor and from a temporal point of view goes well beyond the cyclical measures implemented by central banks.

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Thanks to macroeconomic theory

Two effects resulting from population aging can be analysed. The first concerns the fact that, by increasing the life expectancy of economic agents, the saving rate will tend to increase in order to Thailand WhatsApp Number List be able to sustain consumption for a longer period of life. The second effect, then, derives from the lack of workforce for businesses: the growing scarcity of it induces them to make fewer investments, and, therefore, to ask for fewer savings for the accumulation of productive capital. The result is that both of these effects lead to a marked decline in the global trend of real interest rates, i.e. nominal rates net of inflation.


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