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RESEARCH PAPER
Aging, Migration and Monetary Policy in Poland
1
Narodowy Bank Polski, Poland
2
European Central Bank, Germany
3
SGH Warsaw School of Economics, Poland
4
International Monetary Fund, USA
Submission date: 2021-09-20
Final revision date: 2021-11-15
Acceptance date: 2022-01-04
Publication date: 2022-03-31
GNPJE 2022;309(1):5-30
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
Poland faces a particularly sharp demographic transition. The old-age dependency
ratio is expected to increase from just above 20% in 2000 to over 60% in 2050. At
the same time, the country has recently witnessed a huge wave of immigration,
mostly from Ukraine. In this paper, we investigate how aging and migration will
affect the Polish economy and what consequences these adjustments have for monetary
policy. Using a general equilibrium model with life-cycle considerations, we
show that the decline in the natural rate of interest (NRI) due to demographic processes
is substantial, amounting to around 1.5 percentage points, albeit spread over
a period of 40 years. The impact of migration flows is relatively small and cannot
significantly alleviate the downward pressure on the NRI induced by populating
aging. If the central bank is slow in learning about the declining NRI, an extended
period of inflation running below the target is likely. In this case, the probability
of hitting the zero lower bound (ZLB) becomes a major constraint on monetary
policy, while it could remain under control if the central bank uses demographic
trends to update the NRI estimates in real time.
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