Will bequests attenuate the predicted meltdown in stock prices when baby boomers retire?

Andrew Abel

No 01-2, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Jim Poterba finds that consumers do not spend all of their assets during retirement, and he projects that the demand for assets will remain high when the baby boomers retire. Based on his forecast of continued high demand for capital, Poterba rejects the asset market meltdown hypothesis, which predicts a fall in stock prices when the baby boomers retire. ; The author develops a rational expectations general equilibrium model with a bequest motive and an aggregate supply curve for capital. In this model, a baby boom generates an increase in stock prices, and stock prices are rationally anticipated to fall when the baby boomers retire, even though, as emphasized by Poterba, consumers do not spend all of their assets during retirement. This finding contradicts Poterba's conclusion that continued high demand for assets by retired baby boomers will prevent a fall in the price of capital.

Keywords: Stock - Prices; Retirement (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-fmk
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Related works:
Journal Article: Will Bequests Attenuate The Predicted Meltdown In Stock Prices When Baby Boomers Retire? (2001)
Working Paper: Will Bequests Attenuate the Predicted Meltdown in Stock Prices When Baby Boomers Retire? (2001)
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