Demographic shifts, such as population ageing, have been suggested as possible explanations
for the past decade’s low inflation. We exploit cross-country variation in a long panel to identify age structure effects in inflation, controlling for standard monetary factors. A robust relationship emerges that accords with the lifecycle hypothesis. That is, inflationary pressure rises when the share of dependents increases and, conversely, subsides when the share of working age population increases. This relationship accounts for the bulk of trend inflation, for instance, about 7 percentage points of US disinflation since the 1980s. It predicts rising inflation over the coming decades.
That is from a new BIS paper by Mikael Juselius and Előd Takáts.