Consequences for welfare and pension buffers of alternative methods of discounting future pensions

2010 ◽  
Vol 10 (3) ◽  
pp. 389-415 ◽  
Author(s):  
ALESSANDRO BUCCIOL ◽  
ROEL M. W. J. BEETSMA
Keyword(s):  
The Netherlands ◽  
Open Economy ◽  
Pension System ◽  
Moving Average ◽  
Small Open Economy ◽  
Pension Funds ◽  
Alternative Methods ◽  
Olg Model ◽  
Pension Liabilities ◽  
Over Time

AbstractWe explore the implications of alternative methods of discounting future pension outlays for the valuation of funded pension liabilities. Measured liabilities affect the asset–liability ratio of pension funds and, thereby, their policies. Our framework for analysis is an applied many-generation OLG model describing a small open economy with heterogeneous agents and a two-pillar pension system (with pay-as-you-go and funded tiers) calibrated to that in the Netherlands. We compare mark-to-market discounting against various alternatives, such as discounting against a moving average of past market curves or a curve that is constant over time. The pension buffer is stabilized by adjusting indexation and contribution rates in response to demographic, economic and financial shocks in the economy. Mark-to-market valuation of liabilities produces substantially higher volatility in the pension buffers, but it also generates slightly higher aggregate welfare.

Introduction: Changing Business Systems in the Netherlands in the Twentieth Century

2010 ◽  
Vol 84 (4) ◽  
pp. 737-750 ◽  
Author(s):  
Keetie Sluyterman
Keyword(s):  
Twentieth Century ◽  
The Netherlands ◽  
Open Economy ◽  
Small Open Economy ◽  
Economic Activities ◽  
Business Systems ◽  
Business System ◽  
National Business Systems ◽  
National Business ◽  
Over Time

The organization of economic activities differs among countries and over time. Differences between nations have been highlighted in academic discussions about national business systems and the varieties of capitalism. This group of articles about the Dutch business system contributes to these debates by offering new empirical research from the perspective of a small, open economy and highlighting changes that have occurred during the second half of the twentieth century. While they discuss developments in the Netherlands, the articles also explore general themes, including corporate governance, cartels, and the organization of multinational companies. While the articles show that business systems are in constant flux, comparisons between the Dutch and U.S. systems seem to suggest that each moves at a different pace. A particularly striking aspect of the Dutch stories is the large impact of developments abroad.

Price formation and the inflationary process in a small open economy (The Netherlands)

De Economist ◽  
1975 ◽  
Vol 123 (4) ◽  
pp. 680-722 ◽  
Author(s):  
W. Driehuis ◽  
A. van Heeringen ◽  
P. de Wolff
Keyword(s):  
The Netherlands ◽  
Open Economy ◽  
Small Open Economy ◽  
Price Formation

Financialisation and the Pension System: Lessons from the United States and the Netherlands

2017 ◽  
Vol 15 (4) ◽  
pp. 554-584 ◽  
Author(s):  
Natascha van der Zwan
Keyword(s):  
United States ◽  
The Netherlands ◽  
Pension System ◽  
The United States ◽  
Pension Funds ◽  
The State ◽  
Investment Strategies ◽  
Private Pensions ◽  
Labour Unions ◽  
Pension Systems

Financialisation and the Pension System: Lessons from the United States and the Netherlands The articles explores the financialisation of private pensions in the United States and the Netherlands. It proposes two distinct arguments. First, the article shows that both the American and the Dutch pension systems stand out internationally for their high degrees of capitalisation and the absence of substantive investment restrictions for pension funds. The article posits that both pension systems are highly financialised, yet the process of financialisation has proceeded along different historical paths and within different institutional contexts. Secondly, the article maintains that the financialisation of pension systems is accompanied by its own political dynamics. In both political economies, different groups of actors (employers, labour unions, financial professionals) have made claims over the growing concentration of pension assets. Here, particular emphasis is given to the role of the state. It shows how since the mid-1970s, both American and Dutch pension funds have altered their investment strategies, abandoning public debt as the dominant investment category. The article explains this change in terms of the rising popularity of modern portfolio theory and the immense growth of pension capital in need of new investment options. As austerity politics have made governments more dependent on financial markets, pension funds have become more assertive in leveraging their assets and demanding political reform which are in the interest of the financial industries. Financialisation has thus fundamentally altered the balance of power between the state and financial market actors.

SAVINGS, INVESTMENT, EMPLOYMENT, AND INFLATION IN A SMALL OPEN ECONOMY WITH HABIT PERSISTENCE

2010 ◽  
Vol 14 (3) ◽  
pp. 365-387 ◽  
Author(s):  
Arman Mansoorian ◽  
Leo Michelis ◽  
Mohammed Mohsin
Keyword(s):  
Steady State ◽  
Open Economy ◽  
Inflation Rate ◽  
Small Open Economy ◽  
Living Standards ◽  
Representative Agent ◽  
Habit Persistence ◽  
High Inflation ◽  
Net Foreign Asset ◽  
Over Time

The effects of inflation are studied for a small open economy with a cash-in-advance constraint on consumption in which the representative agent has preferences with habit persistence. An increase in the inflation rate requires a fall in the steady state living standards. On impact, to maintain living standards, the representative agent reduces his savings and labor supply. Investment falls and the current account turns into a deficit. In support of this model, we provide evidence from eight high-inflation countries suggesting that after an increase in the inflation rate, output and investment fall, and the net foreign asset position deteriorates over time.

Demographic change, PAYG pensions and child policies

2016 ◽  
Vol 17 (4) ◽  
pp. 469-487 ◽  
Author(s):  
PETER JOSEF STAUVERMANN ◽  
RONALD RAVINESH KUMAR
Keyword(s):  
Life Expectancy ◽  
Open Economy ◽  
Pension System ◽  
Small Open Economy ◽  
Overlapping Generations Model ◽  
Number Of Children ◽  
Payg Pensions ◽  
Child Allowances ◽  
Pension Benefits ◽  
Consequent Increase

AbstractThe aim of the paper is to investigate how child policies affect the population growth and to what extent these policies are useful to increase pension benefits of a pay-as-you-go pension system in a small open economy. Specifically, we analyze two different child policies: the provision of child allowances and an educational subsidy. We apply an overlapping generations model in its canonical form, where we consider endogenous fertility, endogenous growth and endogenous aging of the society. From the analysis, we conclude that with a child allowance, there is a consequent increase in the number of children and decrease in pension benefits and life expectancy. On the other hand, we note that with an educational subsidy, there is a decrease in the number of children, and an increase in the pension benefits and the life expectancy, respectively. The model developed aims to complement the models of the Unified Growth Theory.

Pensions: the impact of migrations and cross-border workers in a small open economy

2018 ◽  
Vol 18 (2) ◽  
pp. 247-270 ◽  
Author(s):  
MARION LABOURÉ
Keyword(s):  
Economic Growth ◽  
Open Economy ◽  
Pension System ◽  
Small Open Economy ◽  
Future Evolution ◽  
Cross Border ◽  
Age Pyramid ◽  
High Volatility ◽  
Set Up ◽  
The Impact

AbstractThe pension system brings challenges in many high-income countries. While the system was set up at the time of economic growth, policymakers are facing both economic slowdown and aging population. Moreover, there is an incentive mis-match between short to medium term popularity and re-election versus taking necessary decisions to affect long-term sustainability of the system. In a small open economy, the situation is further accentuated by high volatility driven by migrations and cross-borders workers. This paper aims to address the policymakers’ challenges and develops an innovative model, whose main contribution is the way it reflects the cross-border workers’ contribution and impact. Therefore, it allows to not only assess the state liabilities, but also the evolution of the age pyramid with a significant portion of new migrants and cross-border workers, considering the high volatility of workers. It also provides an approach to analyze issues at stake and remove decision biases faced by politicians through policy options and their impact under various economic scenarios. With the model in hand, we analyze three different scenarios for the future evolution of Luxembourg's pension system. In all three scenarios, the results reflect a significant imbalance of the pension system over time (to 2060), going from 1.6% of gross domestic product (GDP) surplus in the best scenario to 14.2% of GDP deficit in the worst scenario. The probability of this worst scenario is related with a worsening of the economic situation, with job destruction and a drop in economic growth impacting cross-border commuters and net migrations.

scholarly journals The Return-risk Performance of Selected Pension Fund in OECD with Focus on the Czech Pension System

2016 ◽  
Vol 64 (6) ◽  
pp. 1981-1988
Author(s):  
Petr Kupčík ◽  
Pavel Gottwald
Keyword(s):  
The Netherlands ◽  
Pension Fund ◽  
Pension System ◽  
Pension Funds ◽  
Sharpe Ratio ◽  
Investment Performance ◽  
The Czech Republic ◽  
Common Features ◽  
Comparison Of The Results ◽  
Sortino Ratio

This paper focuses on the measuring and comparing investment performance of pension funds in selected European countries. Comparison of the investment performance of pension funds is determined by means of the Sharpe ratio and the Sortino ratio. We used data of nominal appreciation of pension funds from the Czech Republic, Slovakia, Poland, Sweden, Switzerland and the Netherlands in the period 2005−2013. These countries were selected because they have many common features but Sweden, Switzerland and the Netherlands were added to the analysis because we wanted to show the differences between a developed and less developed fully funded system. The last part of this article presents the main causes of the differences in investment performance of pension funds. Conclusions of the paper are focused on a comparison of the results of the Sharpe ratio and the Sortino ratio of pension funds from selected countries and recommendations for the Czech pension system. The article proposes a mechanism for determining the order of the negative Sharpe ratio and the Sortino ratio.

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