Impact case study database

The United Nations estimates that by 2050, Spain will be the world’s oldest country, with 40% of the population aged 60 or above. The insights generated by Aksoy et al’s research are therefore particularly significant in the Spanish context: something that has been recognised by the country’s central bank. In 2017, Aksoy was invited to spend his sabbatical term at the Banco de España as a visiting fellow in order to pursue his research on demographic trends. During this period, Aksoy worked directly with the bank’s research team; for example, preparing the background paper for a talk delivered by their head of research, Dr Juan Francisco Jimeno, to the Spanish Economic Association. A publication with Henrique Basso, a Banco de España economist, also resulted [3].

Aksoy’s influence on the bank was direct and considerable. Many internal notes and institutional publications of the Bank of Spain used his results extensively. One of those institutional publications is the bank’s 2018 annual report [B], which devoted one of its four total chapters to discussing the ‘Economic Consequences of Demographic Change’, drawing on Aksoy, Smith and Basso’s work extensively throughout. The report also includes further work undertaken at the bank which builds on the findings of the initial research to focus on the Spanish context. This is an ongoing element of the bank’s research programme. The question of how to adapt fiscal and social policies to demographic changes is one of the most important policy issues under discussion at the Bank of Spain, and Aksoy’s work is mentioned in additional working papers published by its researchers in July 2018 and April 2020 [C, D].

Since Aksoy’s residency at the Banco de España, its governor Pablo Hernández de Cos has gone on to present on demographics and the economy to a series of high-profile international audiences and organisations. Papers delivered by de Cos at the International Centre for Monetary and Banking Studies in Geneva, March 2020; to an audience of international policymakers (including representatives from numerous South American central banks) at the Reinventing Bretton Woods conference in Cuzco, Peru in July 2019; to INVERCO, the representative body for Spanish pension funds and collective investment institutions, in 2019; and to the governing board of the Spanish Institute of Actuaries, in January 2020, and all draw on Aksoy’s work, demonstrating the extent to which these ideas have become central to the Banco de España’s economic outlook. These public presentations were supplemented by additional private and confidential communications on similar subjects.

Both the initial paper and the additional work and publicity given to it by Aksoy’s engagement with the Banco de España have led to an increased focus across the central banking sector on the macroeconomic consequences of demographic change. For example, we find Aksoy’s research cited at the 2015 Jackson Hole conference in a discussion that anticipates the growing importance of demographic factors to the central banking sector [F].

The extent of this influence is evidenced by the large number of references to Aksoy et al’s work in publications by major monetary organisations worldwide, particularly central banks. Over the period between 2015 and 2020, but with increasing frequency in recent years, the research has been cited in briefings and policy papers by organisations including (but not limited to) the Bank of International Settlements, the International Monetary Fund, the European Systemic Risk Board, the Bank of England, the Bank of Finland, the Banca D’Italia, the Banque de France, the Swiss Ministry of Economics, the Asian Development Bank, and the World Bank [see for e.g. G, H, I]. All of these institutions are grappling with the implications of an aging population and in many cases, Aksoy et al’s work has been the basis for further specialised research.

Further demonstrating the increasing centrality of demographic changes to global economic debate, Japan during its presidency of the G20 in 2019 listed demographic change as one of its key policy priorities, including the issue in the G20 Leader’s Declaration that was published at the close of the 2019 G20 meeting in Osaka. The Population Division of the UN’s Department of Economic and Social Affairs described this inclusion as a ‘historic first’. A September 2019 OECD policy paper on ‘Fiscal Challenges and Inclusive Growth in Ageing Societies’, ‘prepared in support of Japan’s G20 presidency’ and formally approved by the G20 finance deputy, cites Aksoy et al’s research [4] in discussing the impact of an ageing society on investment as well as on innovation.

The work of Aksoy and his collaborators has also had a direct impact on the European Central Bank (ECB). Henrique Basso, Aksoy’s co-author on papers 2, 3 and 4, who is himself employed at the Banco de España, was in 2017 invited by the European Union to sit on an ECB expert taskforce charged with researching and developing recommendations around the future of pensions schemes in the EU. The economic implications of this work are significant: in 2017, the value of European pensions schemes was EUR1,670,000,000,000 ( https://ec.europa.eu/eurostat/statistics-explained/index.php/Ageing_Europe_-_statistics_on_pensions,_income_and_expenditure). The taskforce drew directly on Aksoy, Smith and Basso’s research, deploying their theoretical model to build one of the two projections which formed the foundation for its research and recommendations (made to the monetary policy committee of the ECB) [E, J].

Alongside the central banks, many commercial financial institutions have taken an interest in Aksoy, Smith and Basso’s work. Morgan Stanley, Swedbank, Goldman Sachs and CaixaBank all issued client briefings discussing this research and economists for Morgan Stanley drew directly on their research in a paper produced in 2015 and republished by the Bank of International Settlements in 2017 (Pradhan and Goodhart, Demographics will reverse three multi-decade global trends, BIS Working Paper No. 656). Aksoy et al’s work played a major role in this policy-related study, which was presented at a G30 meeting hosted by the Federal Reserve Bank of New York in November 2017, and whose influence can be tracked through a further series of references made by American federal and international central banks [N].

This work has also acted as a conduit to bring Aksoy et al’s research to a more general audience. In 2020, a popular science book by the same authors, The Great Demographic Reversal, was published by Palgrave Macmillan; by December 2020, it ranked at #2 in Amazon’s ‘International Finance’ bestsellers chart. This contribution to public debate follows initial press interest in the research, which saw The Telegraph run a feature on the publication of paper [3]; demonstrating that the increased prominence of this issue for central banking has begun to see it filter through into the general public sphere.

Impact on immigration policy

Aksoy, Smith and Basso’s work has also been invoked in debates around immigration, particularly in Germany, which have now translated into policy changes. One of the implications of the research is the suggestion that immigration policy might provide a way to compensate for the economic implications of an aging population. That is, encouraging well-educated immigrants to enter a society could act as a solution to the slowdown in innovation as a country’s native population begins to age.

The president of major think tank CESifo, who is also an economic advisor to the German government, made this point in a 2016 presentation to the German Federal Ministry of Finance [L], including a table from Aksoy et al’s article to illustrate the impact of demographics on GDP and drawing on their work to inform his analysis of how German public policy should be adapted to maintain the strength of its public finances. His proposed solutions include the encouragement of skilled migration, a point also made in the German Council of Economic Experts’ 2015-16 annual report [M], which again cites Aksoy et al in discussing the relationship between an aging population and inflation and which again concludes that one solution is to bring about ‘an influx of young, skilled workers’.

This is a solution that Germany has recently adopted. In December 2018, the country passed a ‘skilled labour immigration law’, enabling employers in certain sectors of the economy to recruit from outside the EU and granting permission to stay in the country to migrants already in employment. The law came into effect in March 2020.