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Population growth and asset prices

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Abstract

This 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.

Suggested Citation

  • Peter S. Yoo, 1997. "Population growth and asset prices," Working Papers 1997-016, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:1997-016
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    References listed on IDEAS

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    1. 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.
    2. Sylvester J. Schieber & John B. Shoven, 1994. "The Consequences of Population Aging on Private Pension Fund Saving and Asset Markets," NBER Working Papers 4665, National Bureau of Economic Research, Inc.
    3. 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.
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    Cited by:

    1. Shaofeng Xu, 2013. "An Equilibrium Analysis of the Rise in House Prices and Mortgage Debt," Staff Working Papers 13-9, Bank of Canada.
    2. Elod Takats, 2010. "Ageing and asset prices," BIS Working Papers 318, Bank for International Settlements.
    3. Kulish Mariano & Kent Christopher & Smith Kathryn, 2010. "Aging, Retirement, and Savings: A General Equilibrium Analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, July.
    4. 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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    Keywords

    Demography; Population; Prices;
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