Estimating the effects of demographics on interest rates: A robust Bayesian perspective

B-Tier
Journal: Journal of Economic Dynamics and Control
Year: 2024
Volume: 158
Issue: C

Score contribution per author:

2.011 = (α=2.01 / 1 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We highlight a reason for the vast range of estimates for the effect of demographics on interest rates: the magnitudes are not well-identified without often omitted data on capital and life-cycle consumption. Using nonparametric prior sensitivity analysis for an overlapping generations model estimated through Bayesian methods, we show small changes in the prior for the discount rate, intertemporal elasticity of substitution, and depreciation rate can shift posterior quantiles for the effects of demographics by up to 1.5 percentage points. Capital-output ratio data substantially tighten estimates of the depreciation rate but not the discount rate. Life-cycle consumption is especially informative about the intertemporal elasticity of substitution.

Technical Details

RePEc Handle
repec:eee:dyncon:v:158:y:2024:i:c:s0165188923001781
Journal Field
Macro
Author Count
1
Added to Database
2026-02-02