Pension savings and economic growth

De Koning, Kees (2012): Pension savings and economic growth.

Abstract

Savers, including pension savers, convert savings into assets: homes,government bonds and shares.The conversion of savings is for the very long term. Once monies are turned into assets, the reverse process of turning assets into cash cannot be achieved by all savers together. Unavoidably some must stay with the cash flow and value risks of these assets. Savers can swap with other savers, but collectively cannot get out of the risks.The short term attempts to do so lead to financial,economic and fiscal crises. Governments need to take measures to mitigate these risks. The pricing of risks is based on cash flows and future values. The latter is based on "perceived risks". It is always imprecise as it cannot predict what will happen, but it is based on what might happen. This leads to problems trying to asses the values of pension funds in meeting future commitments. To bridge the gap between short term savers preferences for cash and long term commitments to asset classes a number of possible solutions are provided, like pension dividend, economic easing,foreign home buying scheme, and Eurozone government bond yield management scheme.

• Item Type: MPRA Paper
• Language: English
• Keywords: pension fund; savings; economic growth; cash to asset conversion process; savers preferences; financial crisis; economic crisis; fiscal crisis; economic easing; Eurozone government bond yield management scheme; pension dividend
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

References

OECD Pension Outlook 2012