The long run influence of pension systems on the current account

Davoine, ThomasORCID: (2021) The long run influence of pension systems on the current account. Journal of Pension Economics and Finance, 20 (1), pp. 67-101.

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Explaining cross-country differences in current accounts is difficult. While pay-as-you-go pensions reduce the need to save for retirement, contributions to capital-funded pensions are saved for future consumption. An overlapping-generations analysis shows that capital-funded pensions increase net foreign assets holdings. With a multi-pillar system whose capital-funded part accounts for 18% of pensions, the Austrian current account balance would be 1 percentage point of gross domestic product (GDP) higher than with pure pay-as-you-go pensions in 20 years. By comparison, the Austrian current account surplus averages 1.8% of GDP. Empirically, I find that the current account of high-income countries increases with the coverage and replacement rates of capital-funded pensions.

Item Type: Article in Academic Journal
Keywords: Capital-funded pensions; computable general equilibrium; current account; pay-as-you-go pensions; population aging
Funders: Oesterreichische Nationalbank (Anniversary Fund Project Number 15480)
Classification Codes (e.g. JEL): C68; E60; F21; H55
Research Units: Current Research Groups > European Governance, Public Finance and Labor Markets
Date Deposited: 07 Jan 2021 09:19
Last Modified: 24 Feb 2021 10:28
DOI: 10.1017/S1474747219000258
ISSN: 1474-7472

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