Wednesday, July 31, 2013

Demographics and Inflation Relationship Study

Andrew Cates, an economist for UBS, based in Singapore, published a study on the relationship between inflation and demographics this week. He notes that countries with older populations tend to have lower inflation.



















Click on the above image to get a larger picture.

In the chart above we show average inflation levels over the last 5 years plotted against the 5-year change in the dependency ratio. The latter is the ratio of the very old and the very young to the population of working age. A shift down in that ratio implies that the population in a given country is getting younger (and vice versa).

The chart therefore shows that those countries that have been getting older in recent years have typically faced very low inflation rates and, in the case of Japan, deflation. In the meantime those countries that have been getting younger in recent years, such as India, Turkey, Indonesia and Brazil, have faced relatively high inflation rates.

Geir Solem

Elliott Wave Technician
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