Contractual savings or stock market development - Which leads?
The authors study the relationship between the development of contractual savings (assets of pension funds, and life insurance companies) and non-life insurance, and, the development of stock markets (market capitalization and value traded). Their contribution lies in providing time-series evidence on a hypothesis that is very popular - but had not been substantiated - among supporters of fully funded pension systems in which funds invest large shares of their portfolios in tradable securities (equities, bonds). The literature is not clear on its assumption regarding causality between contractual savings, and capital market development. A one-way or two-way relationship is assumed, usually inter-changeably; the authors address the questions of which leads empirically. They present the evidence, including descriptive statistics, and the results of Granger causality tests, for OECD countries, and such countries as Chile, Malaysia, Singapore, South Africa, and Thailand. They do not present a theoretical framework, but do explain how the growth of the contractual savings sector, is thought to promote financial development. The authors find evidence in the data that causality between institutions, and markets either does not exist, or, if it exists, runs predominantly from institutions to markets. To a lesser extent, there is simultaneous causality between institutions, and markets. Furthermore, there is limited evidence that causality runsonly from markets to institutions (the only exception seems to be for non-life insurance in developing countries). Results seem to support the idea that the development of institutional investors, is likely to promote the growth of market capitalization, more than that of value traded. In developing countries, there seems to be no causality from pension funds to growth in value traded, while there is causality from life, and non-life insurance.
|Date of creation:||31 Aug 2000|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Feldstein, Martin, 1996.
"The Missing Piece in Policy Analysis: Social Security Reform,"
American Economic Review,
American Economic Association, vol. 86(2), pages 1-14, May.
- Martin Feldstein, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
- Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
- Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
- Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Markets, Corporate Finance, and Economic Growth: An Overview," World Bank Economic Review, World Bank Group, vol. 10(2), pages 223-239, May.
- Levine, Ross & Zervos, Sara, 1996. "Stock Market Development and Long-Run Growth," World Bank Economic Review, World Bank Group, vol. 10(2), pages 323-339, May.
- Levine, Ross & Zervos, Sara, 1996. "Stock market development and long-run growth," Policy Research Working Paper Series 1582, The World Bank.
- Asher, Mukul G., 1999. "The pension system in Singapore," Social Protection and Labor Policy and Technical Notes 20848, The World Bank.
- Jeannine Bailliu & Helmut Reisen, 1998. "Do funded pensions contribute to higher aggregate savings? A cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(4), pages 692-711, December.
- Jeanine Bailliu & Helmut Reisen, 1997. "Do Funded Pensions Contribute to Higher Aggregate Savings?: A Cross-Country Analysis," OECD Development Centre Working Papers 130, OECD Publishing.
- Feldstein, Martin, 1978. "Do private pensions increase national savings?," Journal of Public Economics, Elsevier, vol. 10(3), pages 277-293, December.
- Martin Feldstein, 1980. "Do Private Pensions Increase National Saving?," NBER Working Papers 0186, National Bureau of Economic Research, Inc.
- Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
- Boyd, John & Smith, Bruce, 1996. "The Coevolution of the Real and Financial Sectors in the Growth Process," World Bank Economic Review, World Bank Group, vol. 10(2), pages 371-396, May.
- John H. Boyd & Bruce D. Smith, 1996. "The co-evolution of the real and financial sectors in the growth process," Working Papers 541, Federal Reserve Bank of Minneapolis.
- Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
- Demirguc-Kunt, Ash & Maksimovic, Vojislav, 1996. "Stock Market Development and Financing Choices of Firms," World Bank Economic Review, World Bank Group, vol. 10(2), pages 341-369, May.
- Impavido, Gregorio & Musalem, Alberto R., 2000. "Contractual savings, stock, and asset markets," Policy Research Working Paper Series 2490, The World Bank.
- Iglesias, Augusto & Palacios, Robert J., 2000. "Managing public pension reserves - Part I : evidence from the international experience," Social Protection and Labor Policy and Technical Notes 21311, The World Bank.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
- Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
- Robert Holzmann, 1997. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 149-178, June.
- Robert Holzmann, 1996. "Pension Reform, Financial Market Development, and Economic Growth; Preliminary Evidence From Chile," IMF Working Papers 96/94, International Monetary Fund.
- Munnell, Alicia H, 1976. "Private Pensions and Saving: New Evidence," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1013-1032, October.
- Vittas, Dimitri & Skully, Michael, 1991. "Overview of contractual savings institutions," Policy Research Working Paper Series 605, The World Bank.
- Alfredo Cuevas & George A Mackenzie & Philip R. Gerson, 1997. "Pension Regimes and Saving," IMF Occasional Papers 153, International Monetary Fund.
- Andrew A. Samwick, 2000. "Is Pension Reform Conducive to Higher Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 264-272, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2421. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.