Resumo:
While a vast literature has shown that population aging reduces productivity and slows down economic
growth, the evidence on the impact of aging on business cycles’ volatility is scarce. Population aging
compromises the effectiveness of fiscal and monetary policy and affects the labor market’s dynamics,
which may lead to increased macroeconomic volatility. However, economic agents’ behavioral changes
due to increased longevity may produce more stable business cycles. Building on a previous study, this
article shows that while output volatility grows as the population ages, consumption and investment
volatility drops. This seemingly contradictory result arises because of the impact of aging on the labor
market’s dynamics.
