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The Effect of Shifting Wealth Ownership on the Term Structure of Interest Rates

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  • Benjamin M. Friedman

Abstract

Substantial shifts in wealth ownership from individuals to pension funds are currently taking place in the United States and also are in prospect for the foreseeable future. Moreover, pension funds typically exhibit portfolio preferences that are markedly different from those of individuals. In a world of heterogeneous investors, redistributions among wealth holders with different portfolio preferences will in general alter the structure of asset yields. Partial-equilibrium simulation experiments based on a model of the U. S. long-term bond market indicate that redistributions of saving flows from individuals to pension funds, in plausible magnitudes, can have major effects on the term structure of interest rates.

Suggested Citation

  • Benjamin M. Friedman, 1980. "The Effect of Shifting Wealth Ownership on the Term Structure of Interest Rates," NBER Working Papers 0239, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0239
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    Cited by:

    1. Benjamin M. Friedman, 1981. "Debt Management Policy, Interest Rates, and Economic Activity," NBER Working Papers 0830, National Bureau of Economic Research, Inc.
    2. Benjamin M. Friedman, 1995. "Economic Implications of Changing Share Ownership," NBER Working Papers 5141, National Bureau of Economic Research, Inc.
    3. V. Vance Roley, 1980. "The Effect of Federal Debt Management Policy on Corporate Bond and Equity Yields," NBER Working Papers 0586, National Bureau of Economic Research, Inc.
    4. Benjamin M. Friedman, 1982. "Federal Reserve Policy, Interest Rate Volatility, and the U.S. Capital Raising Mechanism," NBER Working Papers 0917, National Bureau of Economic Research, Inc.

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