The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security
AbstractIs the stock market boom a result of the baby boom? This paper develops an overlapping generations model in which a baby boom is modeled as a high realization of a random birth rate, and the price of capital is determined endogenously by a convex cost of adjustment. A baby boom increases national saving and investment and thus causes an increase in the price of capital. The price of capital is mean--reverting so the initial increase in the price of capital is followed by a decrease. Social Security can potentially affect national saving and investment, though in the long run, it does not affect the price of capital. Copyright The Econometric Society 2003.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 71 (2003)
Issue (Month): 2 (March)
Other versions of this item:
- Andrew B. Abel, 2002. "The effects of a baby boom on stock prices and capital accumulation in the presence of Social Security," Working Papers 03-2, Federal Reserve Bank of Philadelphia.
- Andrew B. Abel, 2002. "The Effects of a Baby Boom on Stock Prices and Capital Accumulation in the Presence of Social Security," NBER Working Papers 9210, National Bureau of Economic Research, Inc.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
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