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The impact of changing demographics and pensions on the demand for housing and financial assets*

Published online by Cambridge University Press:  06 August 2009

ALEŠ ČERNÝ ,
DAVID MILES  and
L'UBOMÍR SCHMIDT
ALEŠ ČERNÝ
Affiliation:
Cass Business School, City University London (e-mail: Ales.Cerny.1@city.ac.uk)
DAVID MILES
Affiliation:
Bank of England and Imperial College Business School, London (e-mail: David.Miles@bankofengland.co.uk)
L'UBOMÍR SCHMIDT
Affiliation:
UBS London
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Abstract

The main aim of this paper is to analyse the impact of shifting demographics and changes in pension arrangements in a model that includes housing as both an investment asset and a consumption good. We consider the impact on welfare, and on macroeconomic aggregates, of some specific pension reforms. Using a calibrated OLG model with several sources of uncertainty, we find that the impact of ageing and of reform of social security upon the demand for housing and the level of owner occupation is substantial. We find that pension reform has a very significant impact on the demand for, and price of, housing. The interaction between pension reform and housing is a neglected subject and one which the results we present suggest is important.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 9 , Issue 3 , July 2010 , pp. 393 - 420
Copyright
Copyright © Cambridge University Press 2009

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