This study quantifies the macroeconomic impact of population aging with a focus on large houses owned by elderly households for bequest motives, although younger generations may leave the inherited houses vacant. A quantitative overlapping generations model incorporates age-specific mortality rates and bequest motives to generate a hump-shaped age profile for consumption and an upward-sloping age profile for housing and savings. When calibrated to the Japanese economy, the model suggests that bequest-driven housing demand raises the output level but reduces consumption, the natural rate of interest, capital allocation to the goods sector, and housing affordability. These effects are more pronounced when households intend to bequeath housing rather than financial assets and when more houses become vacant upon inheritance.
Keywords: Aging; Natural Rate of Interest; Overlapping Generations Model; Bequest Motives; Intergenerational Transfer of Housing; Japan
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.