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Demographic Changes, Savings and Financial Markets

Hippolyte d'Albis * Professeur, Paris School of Economics ; directeur de recherche, CNRS ; président, Cercle des économistes. Contact :

In this article, the asset meltdown hypothesis, which anticipates a sharp fall in asset prices caused by the transition to retirement of large cohorts of the baby boom, is discussed. First, the correlation between financial and demographic variables is presented and the main theoretical arguments that support the hypothesis are developed. Second, it is shown that these arguments hardly resist a further analysis. In particular, the overall effects of the transition to retirement of the baby boomers on savings and market prices suggest that 1/total household savings should not decrease in the next years; 2/the link between demographic variables and market prices is difficult to establish. If the asset meltdown hypothesis does not seem robust, introducing demographic variables nevertheless help to better understand of the dynamics of financial variables.

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