Population growth and asset prices
AbstractThis paper explores the theoretical relationship between the population growth rate and asset prices implied by an overlapping-generations model. The model shows that changes in a population's age distribution affect asset prices but such changes generate low frequency movements in asset prices. The model also shows that the treatment of expectations matter; a small response of individuals to changes in asset prices has large implications for the path of asset prices. Finally, the model shows that incorporating a supply of assets by interpreting an asset as a claim on physical capital diminishes the magnitude of the relationship but does not change the sign or timing of the relationship between a population's age distribution and asset prices.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1997-016.
Date of creation: 1997
Date of revision:
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- Bakshi, Gurdip S & Chen, Zhiwu, 1994. "Baby Boom, Population Aging, and Capital Markets," The Journal of Business, University of Chicago Press, vol. 67(2), pages 165-202, April.
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NBER Working Papers
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- John Janssen, 2002. "Long-term fiscal projections and their relationship with the intertemporal budget constraint: An application to New Zealand," Treasury Working Paper Series 02/05, New Zealand Treasury.
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