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Retirement in the Shadow (Banking)

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  • Guillermo Ordoñez
  • Facundo Piguillem

Abstract

The U.S. economy has recently experienced two, seemingly unrelated, phenomena: a large increase in post-retirement life expectancy and a major expansion in securitization and shadow banking activities. We argue they are intimately related. Agents rely on financial intermediaries to save for post-retirement consumption. When expecting to live longer, they rely more heavily on intermediaries that use securitization, with riskier but higher returns. A quantitative evaluation of the model shows the potential of the demographic transition to account for a boom in credit and output, but only when it triggers a more extensive use of securitization and shadow banking.

Suggested Citation

  • Guillermo Ordoñez & Facundo Piguillem, 2019. "Retirement in the Shadow (Banking)," NBER Working Papers 26337, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26337
    Note: AG CF EFG ME
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    References listed on IDEAS

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    1. Andreas Fagereng & Charles Gottlieb & Luigi Guiso, 2017. "Asset Market Participation and Portfolio Choice over the Life-Cycle," Journal of Finance, American Finance Association, vol. 72(2), pages 705-750, April.
    2. Bertaut, Carol & DeMarco, Laurie Pounder & Kamin, Steven & Tryon, Ralph, 2012. "ABS inflows to the United States and the global financial crisis," Journal of International Economics, Elsevier, vol. 88(2), pages 219-234.
    3. Luttrell, David & Atkinson, Tyler & Rosenblum, Harvey, 2013. "Assessing the costs and consequences of the 2007–09 financial crisis and its aftermath," Economic Letter, Federal Reserve Bank of Dallas, vol. 8(7), pages 1-4, September.
    4. Rajnish Mehra & Facundo Piguillem & Edward C. Prescott, 2011. "Costly financial intermediation in neoclassical growth theory," Quantitative Economics, Econometric Society, vol. 2(1), pages 1-36, March.
    5. Lee Lockwood, 2012. "Bequest Motives and the Annuity Puzzle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 226-243, April.
    6. Atkinson, Tyler & Luttrell, David & Rosenblum, Harvey, 2013. "How bad was it? The costs and consequences of the 2007–09 financial crisis," Staff Papers, Federal Reserve Bank of Dallas, issue Jul.
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    Cited by:

    1. Ari, Anil & Darracq Pariès, Matthieu & Kok, Christoffer & Żochowski, Dawid, 2016. "When shadows grow longer: shadow banking with endogenous entry," Working Paper Series 1943, European Central Bank.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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