IDEAS home Printed from https://ideas.repec.org/a/bic/journl/v6y2006i1p3-21.html
   My bibliography  Save this article

The Effect of Latvian Pension Reform on Savings and Government Budget

Author

Listed:
  • Konstantins Benkovskis

    (Bank of Latvia)

Abstract

This paper deals with pension reform’s effect on Latvian savings. We are studying the reaction of total savings and their components on change in the fully funded pillar’s share in the total pension system and on increase of the retirement age using overlapping generations model with many generations. The paper describes both the long-term and the short-term theoretical consequences of the changes in pension legislation. Finally, we evaluate the effect of Latvian pension reform on private savings, fully funded savings and government budget balance over the next 10 years. Model’s simulations show that the increase of the retirement age improves budget balance and total savings, while the introduction of the fully funded pensions redistributes the tax payments from the social budget to fully funded savings.

Suggested Citation

  • Konstantins Benkovskis, 2006. "The Effect of Latvian Pension Reform on Savings and Government Budget," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 3-21, July.
  • Handle: RePEc:bic:journl:v:6:y:2006:i:1:p:3-21
    as

    Download full text from publisher

    File URL: http://biceps.org/assets/docs/bje/spring_summer_2006.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Zsolt Darvas & György Szapáry, 2008. "Business Cycle Synchronization in the Enlarged EU," Open Economies Review, Springer, vol. 19(1), pages 1-19, February.
    3. Artis, Michael J & Marcellino, Massimiliano & Proietti, Tommaso, 2004. "Characterizing the Business Cycle for Accession Countries," CEPR Discussion Papers 4457, C.E.P.R. Discussion Papers.
    4. Dmitri Boreiko, 2003. "EMU and accession countries: Fuzzy cluster analysis of membership," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 309-325.
    5. Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
    6. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of Monetary Unification," Department of Economics, Working Paper Series qt791143kp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    7. Peter Backé & Christian Thimann & Olga Arratibel & Oscar Calvo-Gonzalez & Arnaud Mehl & Carolin Nerlich, 2004. "The acceding countries’ strategies towards ERM II and the adoption of the euro - an analytical review," Occasional Paper Series 10, European Central Bank.
    8. Backé, Peter & Thimann, Christian & Arratibel, Olga & Calvo-Gonzalez, Oscar & Mehl, Arnaud & Nerlich, Carolin, 2004. "The acceding countries’ strategies towards ERM II and the adoption of the euro: an analytical review," Occasional Paper Series 10, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Du, C. & Muysken, J. & Sleijpen, O.C.H.M., 2010. "Economy wide risk diversification in a three-pillar pension system," Research Memorandum 055, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olegs Tkacevs, 2006. "The Impact of Fiscal Policy on Prices: Does the Fiscal Theory of Price Level Matter in Latvia?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 23-36, July.
    2. Jurgita Jurgutyte, 2006. "Lithuania's Track to the Euro and the Endogeneity Hypothesis," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 53-69, July.
    3. Larry Sawers, 2006. "Inequality and the Transition: Regional Development in Lithuania," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 6(1), pages 37-51, July.
    4. Fidrmuc, Jarko & Korhonen, Iikka, 2006. "Meta-analysis of the business cycle correlation between the euro area and the CEECs," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 518-537, September.
    5. Jarko Fidrmuc & Iikka Korhonen, 2004. "A Meta-Analysis of Business Cycle Correlations between the Euro Area, CEECs and SEECs – What Do We Know?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 76-94.
    6. Paul De Grauwe & Gunther Schnabl, 2004. "Exchange Rate Regimes and Macroeconomic Stability in Central and Eastern Europe," International Finance 0404011, University Library of Munich, Germany.
    7. Dumitru, Ionut, 2009. "Adoptarea euro in Romania [Euro adoption in Romania]," MPRA Paper 18612, University Library of Munich, Germany.
    8. Zsolt Darvas & György Szapáry, 2008. "Business Cycle Synchronization in the Enlarged EU," Open Economies Review, Springer, vol. 19(1), pages 1-19, February.
    9. Juan Duque & Raúl Ramos & Jordi Suriñach, 2006. "Wages and productivity: the role of labour market institutions in OECD countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 33(4), pages 231-243, September.
    10. Joseph A. Whitt, 1995. "European Monetary Union: evidence from structural VARs," FRB Atlanta Working Paper 95-1, Federal Reserve Bank of Atlanta.
    11. Ronald MacDonald & Paul Hallwood, 2004. "The Economic Case for Fiscal Federalism in Scotland," Working papers 2004-42, University of Connecticut, Department of Economics.
    12. Lastrapes, W. D., 1998. "International evidence on equity prices, interest rates and money," Journal of International Money and Finance, Elsevier, vol. 17(3), pages 377-406, June.
    13. Christos S. Savva & Kyriakos C. Neanidis & Denise R. Osborn, 2010. "Business cycle synchronization of the euro area with the new and negotiating member countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(3), pages 288-306.
    14. Martín Gonzalez Rozada & José Fanelli, 2003. "Business Cycle and Macroeconomic Policy Coordination in MERCOSUR," Business School Working Papers uno, Universidad Torcuato Di Tella.
    15. Frenkel, Michael & Nickel, Christiane, 2005. "New European Union members on their way to adopting the Euro: An analysis of macroeconomic disturbances," Global Finance Journal, Elsevier, vol. 15(3), pages 303-320, February.
    16. Regmi, Krishna & Nikolsko-Rzhevskyy, Alex & Thornton, Robert, 2015. "To be or not to be: An optimum currency area for South Asia?," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 930-944.
    17. Natacha Gilson, 2006. "How to be Well Shod to Absorb Shocks? Shock Synchronization and Joining the Euro Zone," CESifo Working Paper Series 1878, CESifo.
    18. Julius Horvath & Magda Kandil & Subhash Sharma, 1998. "On the European monetary system: the spillover effects of German shocks and disinflation," Applied Economics, Taylor & Francis Journals, vol. 30(12), pages 1585-1593.
    19. Halabi, Claudia E. & Lastrapes, William D., 2003. "Estimating the liquidity effect in post-reform Chile: do inflationary expectations matter?," Journal of International Money and Finance, Elsevier, vol. 22(6), pages 813-833, November.
    20. Sfia, Mohamed Daly, 2006. "Tunisia: Sources Of Real Exchange Rate Fluctuations," MPRA Paper 3129, University Library of Munich, Germany.

    More about this item

    Keywords

    Pension reform; overlapping generations model; savings;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:6:y:2006:i:1:p:3-21. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/biceplv.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lelde Jakobsone (email available below). General contact details of provider: https://edirc.repec.org/data/biceplv.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.