IDEAS home Printed from https://ideas.repec.org/a/bla/asiapr/v4y2009i1p69-92.html
   My bibliography  Save this article

Aging, Asset Markets, and Asset Returns: A View From Europe to Asia

Author

Listed:
  • Axel BÖRSCH‐SUPAN
  • Alexander LUDWIG

Abstract

The extent of the demographic changes is dramatic especially in some Asian and European countries. This paper investigates the effect of aging on global asset markets and asset returns, focusing on markets for productive capital, and especially on interactions between European and Asian economic development. Aging has complex effects on the markets for real capital. If elderly people save less than younger people, interest rates will increase. At the same time, however, the younger generation becomes smaller, which reduces the demand for new investment. The equilibrium effect is thus uncertain. Our multicountry computational equilibrium model delivers a subtle picture: there will be some decline in the return from productive capital, but it is relatively small. We find noticeable interaction effects between labor market and pension reforms in Europe on the one hand, and the demographic and economic developments in Asia, especially India and China, on the other hand.

Suggested Citation

  • Axel BÖRSCH‐SUPAN & Alexander LUDWIG, 2009. "Aging, Asset Markets, and Asset Returns: A View From Europe to Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 4(1), pages 69-92, June.
    • Handle: RePEc:bla:asiapr:v:4:y:2009:i:1:p:69-92
    DOI: 10.1111/j.1748-3131.2009.01109.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1748-3131.2009.01109.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1748-3131.2009.01109.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    2. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    3. Aglietta, Michel & Chateau, Jean & Fayolle, Jacky & Juillard, Michel & Le Cacheux, Jacques & Le Garrec, Gilles & Touze, Vincent, 2007. "Pension reforms in Europe: An investigation with a computable OLG world model," Economic Modelling, Elsevier, vol. 24(3), pages 481-505, May.
    4. Hamilton, Bruce W., 1991. "The baby boom, the baby bust, and the housing market A second look," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 547-552, December.
    5. Hendershott, Patric H., 1991. "Are real house prices likely to decline by 47 percent?," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 553-563, December.
    6. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
    7. Mankiw, N. Gregory & Weil, David N., 1989. "The baby boom, the baby bust, and the housing market," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 235-258, May.
    8. Engelhardt, Gary V. & Poterba, James M., 1991. "House prices and demographic change: Canadian evidence," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 539-546, December.
    9. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
    10. Robin Brooks, 2003. "Population Aging and Global Capital Flows in a Parallel Universe," IMF Staff Papers, Palgrave Macmillan, vol. 50(2), pages 1-3.
    11. Robin Brooks, 2002. "Asset-Market Effects of the Baby Boom and Social-Security Reform," American Economic Review, American Economic Association, vol. 92(2), pages 402-406, May.
    12. Attanasio Orazio P. & Kitao Sagiri & Violante Giovanni L., 2006. "Quantifying the Effects of the Demographic Transition in Developing Economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-44, April.
    13. Attanasio, Orazio & Kitao, Sagiri & Violante, Giovanni L., 2007. "Global demographic trends and social security reform," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 144-198, January.
    14. Swan, Craig, 1995. "Demography and the demand for housing A reinterpretation of the Mankiw-Weil demand variable," Regional Science and Urban Economics, Elsevier, vol. 25(1), pages 41-58, February.
    15. Helmut Reisen, 2000. "Pensions, Savings and Capital Flows," Books, Edward Elgar Publishing, number 2017.
    16. Woodward, Susan E., 1991. "Economists' prejudices: Why the Mankiw-Weil story is not credible," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 531-537, December.
    17. Ludwig, Alexander, 2007. "The Gauss-Seidel-quasi-Newton method: A hybrid algorithm for solving dynamic economic models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1610-1632, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Prettner, Klaus & Bloom, David E. & Strulik, Holger, 2013. "Declining fertility and economic well-being: Do education and health ride to the rescue?," Labour Economics, Elsevier, vol. 22(C), pages 70-79.
    2. Schön, Matthias & Stähler, Nikolai, 2020. "When old meets young? Germany's population ageing and the current account," Economic Modelling, Elsevier, vol. 89(C), pages 315-336.
    3. Axel B?rsch-Supan & Klaus H?rtl & Alexander Ludwig, 2014. "Aging in Europe: Reforms, International Diversification, and Behavioral Reactions," American Economic Review, American Economic Association, vol. 104(5), pages 224-229, May.
    4. Ruppert, Kilian & Stähler, Nikolai, 2020. "Household savings, capital investments and public policies: What drives the German current account?," Discussion Papers 41/2020, Deutsche Bundesbank.
    5. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 781-863, Elsevier.
    6. Bloom, David E. & Börsch-Supan, Axel & McGee, Patrick & Seike, Atsushi, 1970. "Population Aging: Facts, Challenges, and Responses," MEA discussion paper series 201224, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    7. Ruppert, Kilian & Stähler, Nikolai, 2022. "What drives the German current account? Household savings, capital investments and public policies," Economic Modelling, Elsevier, vol. 108(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Axel Börsch-Supan & Alexander Ludwig, 2010. "Old Europe Ages: Reforms and Reform Backlashes," NBER Chapters, in: Demography and the Economy, pages 169-204, National Bureau of Economic Research, Inc.
    2. Axel Börsch-Supan, 2006. "Demographic Change, Saving and Asset Prices: Theory and Evidence," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Anna Park & Daniel Rees (ed.),Demography and Financial Markets, Reserve Bank of Australia.
    3. Börsch-Supan, Axel & Ludwig, Alexander & Sommer, Mathias, 2005. "Aging and asset prices," Papers 07-29, Sonderforschungsbreich 504.
    4. Axel Börsch‐Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi‐Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    5. Börsch-Supan Axel & Ludwig Alexander, 2009. "Living Standards in an Aging Germany: The Benefits of Reforms and the Costs of Resistance," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 163-179, April.
    6. Eric Levin & Alberto Montagnoli & Robert E. Wright, 2009. "Demographic Change and the Housing Market: Evidence from a Comparison of Scotland and England," Urban Studies, Urban Studies Journal Limited, vol. 46(1), pages 27-43, January.
    7. Fortin, Mario & Leclerc, André, 2002. "Déterminants du prix réel des logements au Canada," L'Actualité Economique, Société Canadienne de Science Economique, vol. 78(3), pages 293-320, Septembre.
    8. Yu Chen & Kenneth Gibb & Chris Leishman & Robert Wright, 2012. "The Impact of Population Ageing on House Prices: A Micro-simulation Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(5), pages 523-542, November.
    9. Creina Day, 2018. "Australia's Growth in Households and House Prices," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 502-511, December.
    10. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi-Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    11. Swan, Craig, 1995. "Demography and the demand for housing A reinterpretation of the Mankiw-Weil demand variable," Regional Science and Urban Economics, Elsevier, vol. 25(1), pages 41-58, February.
    12. Yoshihiro Tamai & Chihiro Shimizu & Kiyohiko G. Nishimura, 2017. "Aging and Property Prices: A Theory of Very-Long-Run Portfolio Choice and Its Predictions on Japanese Municipalities in the 2040s," Asian Economic Papers, MIT Press, vol. 16(3), pages 48-74, Fall.
    13. Tamai, Yoshihiro & Shimizu, Chihiro & Nishimura, Kiyohiko G., 2017. "Aging and Property Prices: A Theory of Very Long Run Portfolio Choice and Its Predictions on Japanese Municipalities in the 2040s," HIT-REFINED Working Paper Series 65, Institute of Economic Research, Hitotsubashi University.
    14. Kuismanen, Mika & Laakso, Seppo & Loikkanen, Heikki A., 1999. "Demographic Factors and the Demand for Housing in the Helsinki Metropolitan Area," Discussion Papers 191, VATT Institute for Economic Research.
    15. Barry P. Bosworth & Ralph C. Bryant & Gary Burtless, 2004. "The Impact of Aging on Financial Markets and the Economy: A Survey," Working Papers, Center for Retirement Research at Boston College 2004-23, Center for Retirement Research.
    16. Sun, Tianyu & Chand, Satish & Sharpe, Keiran, 2018. "Effect of Aging on Housing Prices: A Perspective from an Overlapping Generation Model," MPRA Paper 89347, University Library of Munich, Germany.
    17. Hua Chai & Mr. Jun I Kim, 2018. "Demographics, Pension Systems and the Saving-Investment Balance," IMF Working Papers 2018/265, International Monetary Fund.
    18. Ohtake, Fumio & Shintani, Mototsugu, 1996. "The effect of demographics on the Japanese housing market," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 189-201, April.
    19. Krueger, Dirk & Ludwig, Alexander, 2007. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 49-87, January.
    20. Pablo A. Guerron-Quintana & Ryo Jinnai, 2013. "Liquidity, Trends and the Great Recession," UTokyo Price Project Working Paper Series 015, University of Tokyo, Graduate School of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:asiapr:v:4:y:2009:i:1:p:69-92. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/jcerrjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.