Theory predicts that life cycle saving mechanisms will cause real exchange rate variations as the age structure varies. We investigate the impact of demography on the Swedish real exchange rate, measured as the real TCW index, during 1960 to 2000. Time series regressions show that the Swedish demographic structure has significant explanatory power on the real exchange rate. A model using age shares alone as regressors is used for medium term out-ofsample forecasts, outperforming both a naive forecast and forecasts based on an autoregressive model. Finally we use the estimated model in order to make forecasts of the Swedish real exchange rate up to 2015. The model predicts that the Swedish age structure will have a depreciating effect on the real exchange rate up to 2007 followed by an appreciating effect in the end of the forecasting period.

Earlier literature on gender and risk-taking based on US data has found women to be more conservative investors (see e.g Jianakoplos & Bernasek, 1998, for savings; Sundén & Surette, 1998, for retirement savings). The purpose of the present paper is to test empirically whether this holds good, when all background risks are taken into account. I use a unique data on premium pension portfolio choices for 11 000 individuals, eligible in a new public defined-contribution pension system that was initiated in Sweden in 2000, matched with the Swedish Household Survey on Income for 1999. Unlike previous studies, the current data does not suffer from any particular job/occupational selection, and it covers a wider range of income distribution. Further, I use a more refined definition of risk (which is commonly defined as the share of stocks), namely the average standard deviation of a fund’s performance for the three preceding years. Thus the risk measure used here is more accurate, as well as taking into account that, even with a low share of stocks, funds can be considerably risky. The findings of this paper suggest that almost all individuals chose a fairly aggressive investment strategy with almost the whole portfolio invested in stock funds. As in earlier

This paper has considered the dynamics of financial portfolio choice by French households, using data from the ECHP over the period 1994-2001. The panel data allow us to test a number of theoretical predictions which are difficult to analyse with cross-section data: life cycle effects, importance of transaction costs, temperance behavior. The age effects that we estimate are corrected for cohort effects: in particular, the profile for equities is positive in cross-section, but hump-shaped in panel. The Mundlak approach to correct for correlation between the individual error terms and the explanatory variables, allows us to estimate separately average (permanent) and transitory (current) effects for those variables which vary over time. For the case of income, this specification allows us to consider the influence of income risk on portfolio choice. We find a positive (even small) effect of transitory income on the probability of holding risky assets: households with the riskiest income also have riskier portfolios. So, these result contredict risk substitution theory. Last, the inclusion of lagged dependent variables underlines the importance of transaction costs in household portfolio choice, notably with respect to the restricted degree of diversification typically found in survey data. These costs seem particularly important for equities.

Time series regressions indicate that age structure has significant forecasting power on Swedish inflation. The results agree with a Phillips-Okun framework, assuming that the demographic composition affects productivity. The relative age effects are also relatively well in accordance with what could be expected from life-cycle theory. In the forecasting exercise the age model outperforms the estimated benchmarks; i.e. two autoregressive models, an ARIMA and the 2 per cent forecast corresponding to the stipulated inflation target. The age model is also considerably better than the consensus forecasts and it is equal in merit with a general VAR model that has been used by the Riksbank (Bank of Sweden). We conclude that the source of information embedded in the age shares is something the Riksbank should consider when conducting monetary policy. When extending the forecasting horizon, the age model predicts a significant rise in the inflationary pressure after 2005 when the big baby boom cohort of the 1940s enters retirement.