Population Aging and Ineffectiveness of Monetary Policy in Developing Economies

Recent strands of literature have argued that population aging diminishes the effectiveness of monetary policies. It is not only the OECD countries but also the developing economies that are currently experiencing a declining demographic dividend. The impact of population aging on the effectiveness of conventional monetary policies in developing economies remains underexplored. Using country-level panel data this is the first scholarly attempt to test the hypothesis that population aging diminishes the effectiveness of monetary policies in 15 developing economies. The results of the first-difference fixed-effects estimators with Driscoll-Kraay Covariance strongly support the hypothesis. The policy implications are discussed.