This paper argues that the low global inflation since the early 1980s is partly due to demographic changes. In particular, a growing global labor market kept a ceiling on wages, which kept a ceiling on prices. It also increased productivity. Those trend of a growing global labor market is reversing. Therefore, over the next few decades we should see an upward bias in inflation and interest rates and a ceiling on productivity. From the abstract:
This led to a shift in manufacturing to Asia, especially China; a stagnation in real wages; a collapse in the power of private sector trade unions; increasing inequality within countries, but less inequality between countries; deflationary pressures; and falling interest rates. This shock is now reversing. As the world ages, real interest rates will rise, inflation and wage growth will pick up and inequality will fall. What is the biggest challenge to our thesis? The hardest prior trend to reverse will be that of low interest rates, which have resulted in a huge and persistent debt overhang, apart from some deleveraging in advanced economy banks. Future problems may now intensify as the demographic structure worsens, growth slows, and there is little stomach for major inflation.