Demography, Capital Flows and Asset Allocation over the Life-cycle

Katja Mann and Margaret Davenport

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: This paper studies the effect of population aging on portfolio choice, asset prices and international asset trades. In a multi-period OLG model, we analyze how an increase in longevity or a decrease in fertility in a country affects the demand for safe and risky assets. In a closed economy, given a fixed supply, the riskfree rate falls and the risk premium rises, because retirees prefer to hold a larger share of safe assets in their portfolio than working-age households. In a financially integrated world, countries with more extreme demographic trends export risky assets and import safe assets. We quantify these effects for the United States.

JEL-codes: G11 G15 J11 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-age and nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145948

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