The Role of Pension Funds on Capital Market Growth in the New EU Member States

Gazmore Rexhepi and Burim Gashi

Ekonomista, 2022, issue 4, 437-454

Abstract: The main goal of this paper is to analyse the impact of pension funds on capital market development in 11 new EU member states1 (NMS ) from Central and Eastern Europe, using annual data from 2010 to 2020. Stock market capitalization and private bond market capitalization are used as a proxy for capital market growth. The relationship between the variables is examined using the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) methods. The results indicate that pension funds have a positive effect on growth in stock and bond markets. These results raise a number of implications that call for a careful reconsideration of the management approach to pension funds and for a reassessment of their investment strategies. As pension funds accumulate sizable assets, they should switch their investment strategies towards more risk-oriented portfolios.

Keywords: capital market development; pension funding; panel cointegration (search for similar items in EconPapers)
JEL-codes: G15 G23 G30 H55 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aoq:ekonom:y:2022:i:4:p:437-454

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