Vermögenspreise, Alterung und Ersparnis / Asset Prices, Aging and Saving: Gibt es einen demografisch bedingten „Asset Meltdown“? / Should We Expect an Asset Meltdown for Demographic Reasons?

Peter Spahn

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2007, vol. 227, issue 1, 102-106

Abstract: In simple overlapping-generation models, the young save by purchasing assets from the old, who in turn finance their consumption by spending the proceeds. If household saving of a shrinking younger generation falls short of planned, constant asset sales by the old generation, asset prices might drop. This note argues that the above asset-meltdown argument holds only in case of a strict cash-in-advance constraint in a model with sharp demarcations between periods. Here, the shrinking size of the young generation establishes a supply-side constraint for production, and the old cannot realize the planned value of asset sales so that goods prices cannot be bidden up. In a more realistic setting of simultaneous and slow changes, only some flexibility and elasticity of the financial system is needed to resolve the cash-in-advance constraint. Excess goods demand then will produce rising prices. Then, necessarily additional savings (in the form of undistributed profits) arise as a flow-of-funds effect, which in turn help to maintain asset market equilibrium. Asset prices nevertheless might fall because of rising interest rates if monetary policy reacts to inflationary tendencies (if goods-supply constraints persist). But this line of reasoning is different from the shortage-of-saving myth.

Keywords: Funded pension system; asset meltdown; life-cycle saving; widow’s cruse (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/jbnst-2007-0107 (text/html)

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:jns:jbstat:v:227:y:2007:i:1:p:102-106:n:7

DOI: 10.1515/jbnst-2007-0107

Access Statistics for this article

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) is currently edited by Peter Winker

More articles in Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) from De Gruyter
Bibliographic data for series maintained by Peter Golla ().