Demographic Changes and Asset Prices in an Overlapping Generations Model
Beatrice Desiree Simo-Kengne,
Frank Riedel and
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Ghislain-Herman Demeze-Jouatsa: Center for Mathematical Economics, Bielefeld University
No 672, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University
We examine the effect of demographic shifts on asset prices in an overlapping generations model with endogenous population dynamics. We establish a robust inverse relationship between returns and the old dependency ratio. We document the absence of a simple monotonic relationship between asset prices and demographic parameters. Returns depend on the joint evolution of fertility, mortality, and lifetime work in a complex way that we quantify. We carry out an extensive empirical study involving 55 countries. Both theoretical and empirical findings reconcile existing propositions on the population age structure and asset returns for riskless and short-lived risky assets.
Keywords: Demography; Asset prices; OLG; Panel cointegration; Granger causality (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:672
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