Working Paper

Population growth and asset prices

Abstract: This paper explores the theoretical relationship between the population growth rate and asset prices implied by an overlapping-generations model. The model shows that changes in a population's age distribution affect asset prices but such changes generate low frequency movements in asset prices. The model also shows that the treatment of expectations matter; a small response of individuals to changes in asset prices has large implications for the path of asset prices. Finally, the model shows that incorporating a supply of assets by interpreting an asset as a claim on physical capital diminishes the magnitude of the relationship but does not change the sign or timing of the relationship between a population's age distribution and asset prices.

Keywords: Demography; Population; Prices;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 1997

Number: 1997-016