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Aging, Housing, and Macroeconomic Inefficiency

Author

Listed:
  • Yasutaka Ogawa

    (Director and Senior Economist, Institute for Monetary and Economic Studies (currently, Financial System and Bank Examination Department), Bank of Japan (E-mail: yasutaka.ogawa@boj.or.jp))

  • Jiro Yoshida

    (Pennsylvania State University and the University of Tokyo (E-mail: jiro@psu.edu))

Abstract

This study quantifies the macroeconomic impact of population aging with a focus on large houses owned by elderly households for bequest motives, although younger generations may leave the inherited houses vacant. A quantitative overlapping generations model incorporates age-specific mortality rates and bequest motives to generate a hump- shaped age profile for consumption and an upward-sloping age profile for housing and savings. When calibrated to the Japanese economy, the model suggests that bequest-driven housing demand raises the output level but reduces consumption, the natural rate of interest, capital allocation to the goods sector, and housing affordability. These effects are more pronounced when households intend to bequeath housing rather than financial assets and when more houses become vacant upon inheritance.

Suggested Citation

  • Yasutaka Ogawa & Jiro Yoshida, 2024. "Aging, Housing, and Macroeconomic Inefficiency," IMES Discussion Paper Series 24-E-04, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:24-e-04
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    File URL: https://www.imes.boj.or.jp/research/papers/english/24-E-04.pdf
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    More about this item

    Keywords

    Aging; Natural Rate of Interest; Overlapping Generations Model; Bequest Motives; Intergenerational Transfer of Housing; Japan;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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