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Pension systems and the current account: An empirical exploration

Miriam Koomen and Laurence Wicht

Journal of International Money and Finance, 2022, vol. 120, issue C

Abstract: This paper empirically investigates the role of pension systems in driving current account balances. We construct three indicators—a system’s type of funding, generosity, and coverage—to measure pension systems. Using a panel of 49 countries that spans over 30 years, we find that the presence of a fully-funded system is associated with a higher current account balance. Further, we find that this effect increases with the system’s generosity and coverage. In contrast, we find no significant correlation between pay-as-you-go systems and current account balances. By accounting for pension indicators, we are able to explain a significant share of the increase in current account surpluses in advanced economies over the past two decades.

Keywords: EBA model; Current account; Saving-investment balance; Fully-funded system; Pay-as-you-go system (search for similar items in EconPapers)
JEL-codes: F32 H55 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:120:y:2022:i:c:s0261560621001716

DOI: 10.1016/j.jimonfin.2021.102520

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