The impact of funded pension schemes in domestic capital markets: evaluating global reforms

Juan Brida and María Seijas ()
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María Seijas: Facultad de Ciencias Económicas y de Administración - Universidad de la República

Economics Bulletin, 2016, vol. 36, issue 1, 493-514

Abstract: This article investigates whether the implementation of funded pension schemes globally has prompted the development of domestic capital markets worldwide, considering 31 pension schemes over the period of 1990-2011. The methodological strategy relies upon panel data regressions applied to depth and liquidity indicators of stock and bond markets. The analysis has revealed that individual capitalization pension schemes have meant a stimulus to stock market depth. A negative causality with stock market liquidity is also evidenced, which is linked to the long-term profile of pension portfolio management, which privileges funding strategies on trading strategies. Given the structural diversity of pension systems studied, the article uses clustering classification tools for segmenting the population according to the importance of pension schemes in the economy. This analysis shows that there are homogeneous groups whose members have similar age of the systems, but not a geographical proximity or type of system structure. It is found that the attribute of belonging to a cluster determines significant impacts of pension systems in relation to indicators of capital market development. Stock markets depth and liquidity indicators receive the positive impacts of greater magnitude from the systems included in the advanced maturation cluster. Pension schemes belonging to the low gradual and incipient maturation cluster exert significant impacts on public bond markets depth.

Keywords: individual capitalization pension funds; capital markets; cluster analysis; panel data regression (search for similar items in EconPapers)
JEL-codes: G2 H7 (search for similar items in EconPapers)
Date: 2016-03-17
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