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Understanding factors that drive asset demand is central to understanding movement in long term real interest rates. In this paper we begin by documenting that much of the increase in the demand for asset in the US in the 30 years prior to Covid represented an increased desire to hold more assets for given age and income levels. For example, if we focus on the 55-64 age group, they increased their ratio wealth-to-income by 35-55%. We then develop a model of asset demands which combines retirement motives and inter-temporal substitution motives to quantitatively explore different factor that may have contributed to such a change. Our findings suggest that decreasing interest rates likely led to a substantial increased demand for retirement wealth. We also explore some of the across group heterogeneity and suggest that social security may explain why the lowest income group did not follow the general trend. Finally, we discuss some of the potential macroeconomics implications of long run asset demands that are a decreasing function of interest rates.
