While the link between demographic change and stock prices is a positive question, the second issue that we investigate is normative: whether the United States is “saving enough for its old age.” The coming increase in the ratio of dependent elderly to working age adults will, ceteris paribus, lower the average level of consumption. In the face of this coming demographic shock, it may be optimal for the country to save a higher fraction of its income, in order to smooth consumption. In addressing both of these issues, we make use of a forward-looking macro-demographic model which explicitly models the process of investment. One of the.
