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Do Fundamentals and Credibility Matter in a Funded Pension System ?A Markov Switching Analysis for Australia and Iceland

Author Info

Listed author(s):
  • Mariangela Bonasia
  • Oreste Napolitano

Abstract

Since the turn of the millennium the problem of credibility of the social security system has spread to the private pension funds sector. This study focus on the Australian and Icelandic experiences to study the credibility of pension fund performance and pension reform. Our credibility indicator is a derived from a CAPM time-varying model. We investigate, using the Markov switching model, the linkages between economic fundamentals, the credibility regimes. We found large differences in the value of the coefficients for all macroeconomic variables. Our findings make a contribution to modelling policy credibility as a non-linear process with two distinct regimes.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/80291/1/03-Bonasia.pdf
File Function: 03-Bonasia
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Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

Volume (Year): 50 (2007)
Issue (Month): 2 ()
Pages: 221-248

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Handle: RePEc:bxr:bxrceb:2013/80291
Contact details of provider: Web page: http://difusion.ulb.ac.be

More information through EDIRC

Keywords: Credibility; Pension funds; Kalman filter; Markow switching model;

Find related papers by JEL classification:

  • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
  • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
  • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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  1. Gabriel Perez-Quiros & Allan Timmermann, 2000. "Firm Size and Cyclical Variations in Stock Returns," Journal of Finance, American Finance Association, vol. 55(3), pages 1229-1262, 06.
  2. Shiu-Sheng Chen, 2007. "Does Monetary Policy Have Asymmetric Effects on Stock Returns?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 667-688, 03.
  3. Catalan, Mario & Impavido, Gregorio & Musalem, Alberto R., 2000. "Contractual savings or stock market development - Which leads?," Policy Research Working Paper Series 2421, The World Bank.
  4. Hazel Bateman, 2003. "Regulation of Australian Superannuation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(1), pages 118-127.
  5. Tim Besley & Andrea Prat, 2005. "Credible pensions," Fiscal Studies, Institute for Fiscal Studies, vol. 26(1), pages 119-135, March.
  6. Ang, Andrew & Bekaert, Geert, 2002. "Regime Switches in Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 163-182, April.
  7. Hazel Bateman & John Piggott, 1997. "Private Pensions in OECD Countries: Australia," OECD Labour Market and Social Policy Occasional Papers 23, OECD Publishing.
  8. Groenewold, Nicolaas & Fraser, Patricia, 1999. "Time-varying estimates of CAPM betas," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 48(4), pages 531-539.
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