Abstract:
The aim of this study is to find out whether there is significant effect from age
structural transitions on inflation dynamics in some selected South Asian countries
such as Sri Lanka, India and Bangladesh. It has been shown that the age structural
transitions can disrupt macroeconomic equilibriums of countries, if unattended. Sri
Lanka is facing a decreasing youth dependency ratio growth and increasing elderly
dependency ratio growth phase as a result of age structural transitions. This poses
serious concerns in terms of obvious factors such as health budget and social security
payments to elders in future. In this thesis, I endeavor to study whether age structural
transition has an implication on an important macroeconomic indicator which is
inflation. A structural VAR model has been constructed to answer this issue. Elderly
dependency ratio growth, youth dependency ratio growth, real interest rate and output
gap growth are the selected variables from 2003 to 2018 for these models. Cholesky
decomposition and structural decomposition used to check the robustness of the
models. The empirical results showed that the growth of youth dependency ratio is
inflationary for Sri Lanka. But for India and Bangladesh growth of youth dependency
ratio does not have any significant effect on inflation. Growth of elderly dependency
ratio does not have any significant effect on inflation for Sri Lanka, India and
Bangladesh. But the magnitude of the impact from elderly and youth dependency ratio
growth on inflation is around 5% over the period of 10 months as the variance
decomposition reveals for Sri Lanka and for India and Bangladesh it is around 2%.
Citation:
Ariyarathna, P.A.H.R. (2020). Age structural transitions and inflation dynamics in selected south Asian countries [Master's theses, University of Moratuwa]. Institutional Repository University of Moratuwa. http://dl.lib.uom.lk/handle/123/20417