The Effect of Shifting Wealth Ownership on the Term Structure of Interest Rates

24 Pages Posted: 15 Feb 2001 Last revised: 29 Aug 2010

See all articles by Benjamin M. Friedman

Benjamin M. Friedman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 1980

Abstract

Substantial shifts in wealth ownership from individuals to pension funds are currently taking place in the United States and also are in prospect for the foreseeable future. Moreover, pension funds typically exhibit portfolio preferences that are markedly different from those of individuals. In a world of heterogeneous investors, redistributions among wealth holders with different portfolio preferences will in general alter the structure of asset yields. Partial-equilibrium simulation experiments based on a model of the U. S. long-term bond market indicate that redistributions of saving flows from individuals to pension funds, in plausible magnitudes, can have major effects on the term structure of interest rates.

Suggested Citation

Friedman, Benjamin M., The Effect of Shifting Wealth Ownership on the Term Structure of Interest Rates (May 1980). NBER Working Paper No. w0239. Available at SSRN: https://ssrn.com/abstract=260431

Benjamin M. Friedman (Contact Author)

Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
United States
617-495-4246 (Phone)

National Bureau of Economic Research (NBER)

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