We exploit cross-sectional variation in the response of US states to an identified monetary policy shock to study how the impact of monetary policy varies with the age structure of the population. We find that the economy's response is weaker the greater the share of population under 35 years of age and stronger the greater the share between 40 and 65. We find that all age groups become more responsive to monetary policy shocks when the proportion of the middle-aged increases. We provide evidence consistent with middle-aged entrepreneurs starting and expanding businesses in response to an expansionary monetary shock.
Leahy, John V., and Aditi Thapar.
"Age Structure and the Impact of Monetary Policy."
American Economic Journal: Macroeconomics,
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Interest Rates: Determination, Term Structure, and Effects
Demographic Trends, Macroeconomic Effects, and Forecasts
Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics