EconPapers    
Economics at your fingertips  
 

A Framework for Macroprudential Stress Testing

Joe Morell, Jonathan Rice and Frances Shaw
Additional contact information
Frances Shaw: Central Bank of Ireland

No 7/RT/22, Research Technical Papers from Central Bank of Ireland

Abstract: Demographic dynamics and the shift of population pyramids towards an inverted pyramid shape in advanced economies are leading to relative scarcity of labour and excess savings. What are the effects of these dynamics on the relative wealth accumulation journeys of different cohorts? Within a fixed-effect cross country panel framework, I find that savings by an increasing share of households aged between 45 and 65, a rise in retired over-65s, and a decrease in working-age and low-wealth agents in their twenties and thirties can explain most of the decline in rates of return across countries in the last few decades, and similarly a large part of the increase in wages. In this context and looking to the future, wealth accumulation out of income and capital returns by cohorts living in advanced economies and retiring in future decades is set to become increasingly difficult, as higher wages are not sufficient to compensate for lower returns over long periods of time. Current young and future generations are therefore set to face progressively lower standards of living at retirement and/or increasingly high saving ratios in working age.

Keywords: macroprudential stress testing; capital buffers; scenario analysis. (search for similar items in EconPapers)
JEL-codes: E37 E58 G21 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-age and nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.centralbank.ie/docs/default-source/pub ... f?sfvrsn=ce069b1d_11 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbi:wpaper:7/rt/22

Access Statistics for this paper

More papers in Research Technical Papers from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().

 
Page updated 2025-03-30
Handle: RePEc:cbi:wpaper:7/rt/22