Enhancing Employee Pension Fund Performance for Sustainable Economic Growth in Indonesia

Yuli Susanti
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Yuli Susanti: Monash University

Warwick-Monash Economics Student Papers from Warwick Monash Economics Student Papers

Abstract: In an era of unprecedented financial challenges, health emergencies, and technological disruptions, pension funds are critical to economic stability. Focused on the contexts of Indonesian employee pension funds, the study navigates the intricate dynamics of pension systems within the broader economy. Against an evolving global landscape marked by financial uncertainties and demographic shifts, the research scrutinizes how distinct pension schemes adopted by Indonesian employee pension funds shape the resilience and efficacy of their respective pension funds. The research employs two distinct yet complementary models to investigate the dynamic of pension fund outcomes amidst varying macroeconomic conditions and micro-level management practices. Firstly, a Vector Autoregression (VAR) model is utilized to explore the intricate interactions between macroeconomic variables. The VAR model allows for the simultaneous examination of multiple variables to understand the short and long-term effects on pension fund dynamics. Secondly, a micro-level panel data regression model is employed to delve deeper into specific factors influencing pension fund performance, including contribution rates, investment strategies, coverage, regulatory frameworks, and risk management practices. The analysis incorporates treatment variables related to the COVID-19 pandemic to examine the resilience of pension funds to external shocks. The empirical findings reveal significant associations between various macroeconomic factors, micro-level management practices, and pension fund performance outcomes. Notably, higher contribution rates, broader coverage, and effective risk management are found to positively impact pension fund performance, while certain aspects of the funding mechanism and regulatory framework exhibit negative associations. The study contributes to the existing literature by offering insights into the complex interplay between macroeconomic conditions, micro-level management practices, and pension fund outcomes, providing valuable implications for policymakers, practitioners, and stakeholders in the pension fund industry.

Keywords: Pension funds; Economic stability; Investment strategies; Risk management; Macroeconomic; VAR model; Indonesia pension funds JEL classifications: C33; E21; G22; G23; G53; H55; J32 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-age and nep-sea
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