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Can Investments in Emerging Markets Help to Solve the Aging Problem?

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  • Robert Holzmann

Abstract

Prefunding of pension commitments in OECD economies is increasingly seen as a central strategy to cope with the aging of their populations. This paper argues that investments in emerging markets can help at the margin but are unable to solve the demographic problem. While these investments bring potential advantages through enhanced risk diversification, higher rates of return, and accelerated financial market development, the total effects are likely to be limited. Furthermore, in order to harvest them, capital sending and receiving countries must fulfill various politically and economically challenging requirements. For pension policy, the limited contribution of pre-funding at home and abroad in order to address the demographic problem implies that enhanced emphasis must be given to domestic reforms.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-06/cesifo_wp304.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 304.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_304

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Keywords: Aging; pensions; international investments; emerging markets; risk diversification;

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References

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  1. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  2. David Miles & Allan Timmermann, 1999. "Risk sharing and transition costs in the reform of pension systems in Europe," Economic Policy, CEPR & CES & MSH, vol. 14(29), pages 251-286, October.
  3. Klaus Schmidt-Hebbel, 1998. "Chile's Takeoff: Facts, Challenges, Lessons," Working Papers Central Bank of Chile 34, Central Bank of Chile.
  4. Robert Holzmann, 1996. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile," IMF Working Papers 96/94, International Monetary Fund.
  5. Bernd Raffelhuschen & Laurence J. Kotlikoff, 1999. "Generational Accounting around the Globe," American Economic Review, American Economic Association, vol. 89(2), pages 161-166, May.
  6. Gilbert,Christopher L. & Vines,David (ed.), 2000. "The World Bank," Cambridge Books, Cambridge University Press, number 9780521790956, November.
  7. Börsch-Supan, Axel & Winter, Joachim, 1999. "Pension reform, savings behavior and corporate governance," Sonderforschungsbereich 504 Publications 99-48, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  8. repec:fth:harver:1490 is not listed on IDEAS
  9. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  10. F.L. MacKellar & T.Y. Ermolieva & H. Reisen, 1999. "Globalization, Social Security, and International Transfers," Working Papers ir99056, International Institute for Applied Systems Analysis.
  11. Michele Boldrin & Juan J. Dolado & Juan F. Jimeno & Franco Peracchi, 1999. "The future of pensions in Europe," Economic Policy, CEPR & CES & MSH, vol. 14(29), pages 287-320, October.
  12. Landis MacKellar & Helmut Reisen, 1998. "A Simulation Model of Global Pension Investment," OECD Development Centre Working Papers 137, OECD Publishing.
  13. Cutler, D.M. & Poterba, J.M. & Sheiner, L.M. & Summers, L.H., 1990. "An Aging Society: Opportunity Or Challenge," Working papers 553, Massachusetts Institute of Technology (MIT), Department of Economics.
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Cited by:
  1. Eichhorst, Werner & Gerard, Maarten & Kendzia, Michael J. & Mayrhuber, Christine & Nielsen, Conny & Rünstler, Gerhard & Url, Thomas, 2011. "Report No. 42: Pension Systems in the EU – Contingent Liabilities and Assets in the Public and Private Sector," IZA Research Reports 42, Institute for the Study of Labor (IZA).
  2. Börsch-Supan, Axel & Ludwig, Alexander & Winter, Joachim, 2002. "Aging and International Capital Flows," Sonderforschungsbereich 504 Publications 02-27, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  3. Erik Lueth, 2008. "Capital Flows and Demographics--An Asian Perspective," IMF Working Papers 08/8, International Monetary Fund.
  4. Barry P. Bosworth & Ralph C. Bryant & Gary Burtless, 2004. "The Impact of Aging on Financial Markets and the Economy: A Survey," Working Papers, Center for Retirement Research at Boston College 2004-23, Center for Retirement Research.
  5. Asher, Mukul G., 2002. "The Role of Global Economy in Financing Old Age: The Case of Singapore," Discussion Paper 79, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  6. P. R. Lane, 2001. "The National Pensions Reserve Fund: Pitfalls and Opportunities," Trinity Economics Papers 20017, Trinity College Dublin, Department of Economics.
  7. Forum Franco Allemand, 2001. "EU Labour Markets," Working Papers 2001-05, CEPII research center.
  8. Narciso, Alexandre, 2010. "The impact of population ageing on international capital flows," MPRA Paper 26457, University Library of Munich, Germany.
  9. Holzmann, Robert, 2005. "Demographic Alternatives for Aging Industrial Countries: Increased Total Fertility Rate, Labor Force Participation, or Immigration," IZA Discussion Papers 1885, Institute for the Study of Labor (IZA).

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