Stuck in Place: Persistent Effects of Missing Early-Career Job Moves (work in progress)
Demographic Change and the Ultimate Forward Rate (with Alexander Ludwig) (work in progress)
We suggest to base estimates of the ultimate forward rate on the natural rate of return, which we predict by use of a quantitative macroeconomic model. Our approach acknowledges a forward looking mechanism by modeling how demographic change suppresses asset returns because of labor shortage and capital abundance. Specifically, we develop a novel multi-period overlapping generations model with a portfolio choice, where demographic processes are taken as exogenous. Our quantitative evaluations suggest that until 2060 the estimate of the real natural rate decreases to −1.7% to −2.1%. From this perspective, negative real interest rates can be expected for the next decades, and nominal rates will be only slightly above zero.
Risk, Demographic Change, and Asset Returns for the Long-Run (Master Thesis)
I inspect the impact of demographic change on asset returns within a largescale quantitative OLG model for Germany over the period 1980-2060. To that end, I develope a detailed population projection model which delivers the exogenous demographic transition for the macroeconomic model. Including granular demographic forecasts is a novelty in the field of large-scale macroeconomic models but needed to pick up all aspects of demographic change over the next decades. The results of my calibrated model show that demographic change is projected to decrease the risky rate of return by 1.43%p until 2040, while the risk-free rate shows a decline over this period of 1.85%p resulting in a marked increase in the risk premium of 0.42%p.