![]() is, and the process of population aging is accelerating worldwide. 9Ī number of advanced economies are further along in this demographic transition than the U.S. population growth, including net international migration, is expected to slow from about 0.8 percent in recent years to under 0.5 percent in 2050, with nearly two-thirds of that growth coming from net migration. 7 It averaged around 2 percent per year in the latter half of the 1960s and slowed to 1.2 percent per year over 2010-2015. Reflecting projections of relatively stable fertility rates and continued aging of the population, world population growth is expected to slow. will be 42 years old and that the number of people age 65 or older per 100 of working-age people, those age 15 to 64, will be more than double what it was in 1970. population is approaching 38 years old, nearly 10 years older than in 1970. ![]() Average life expectancy at birth is now nearly 80 years old, 30 years higher than it was in 1900. 3Īs these demographic changes have played out, the average life expectancy in the U.S. 2 This is less than the United Nations’ estimated 2.1 replacement rate needed to keep the population stable, and it is considerably less than the fertility rate in 1900, which was over 3. after World War II, and the subsequent echo when the baby boom generation began having their own children, were exceptions to a generally downward trend in the birth rate. There were changes in social norms regarding the use and availability of birth control. ![]() The shift in population from rural to urban areas reduced the need for large families to run farms. there were shifting preferences for smaller families because of the rising opportunity costs of having children and the higher costs of raising and educating them. 1 But increased knowledge and technological change in the form of advances in medicine, public health, and nutrition began to lower mortality rates. Until the early 18 th century, world population grew little because high mortality rates offset high fertility rates. Of course, the views I’ll present are my own and not necessarily those of the Federal Reserve System or my colleagues on the Federal Open Market Committee. Today I will talk about some of these demographic trends and their policy implications. ![]() So to understand the global economy, it helps to understand changing demographics and the challenges they pose for monetary and fiscal policymakers. Moreover, differences in demographic trends across countries can be expected to influence current account balances and exchange rates. Demographic change can influence the underlying growth rate of the economy, structural productivity growth, living standards, savings rates, consumption, and investment it can influence the long-run unemployment rate and equilibrium interest rate, housing market trends, and the demand for financial assets. In addition, as policy has begun to normalize, the question has been raised: “what is normal?” To answer such a question, we need to understand how the underlying fundamentals of the economy are evolving. More recently, as the economy has moved from financial crisis and the Great Recession to sustainable expansion, attention has shifted from cyclical aspects of the economy to structural factors. Malthus’s writings on population growth are a part of many history-of-thought courses in economics. There is a strong tradition of studying demography as part of economics. The word “demographics” comes from the Ancient Greek: “demo” meaning people and “graphics” meaning measurement. This might seem like an unusual topic for a Cato conference, but demographics have been on my mind, and not just because I had a birthday last month. Whether you interpret 35 as young or old depends on the context, which brings me to my topic today: demographics and their implications for the economy and policy. The series’ longevity underscores the important contributions it has made over the years to the public discourse on monetary economics and policy. To some of us, 35 seems relatively young, but for a conference series, it is a ripe old age. I thank the organizers for inviting me to speak at the Cato Institute’s 35th annual monetary conference. Watch video of President Mester’s address here
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