Template-type: ReDif-Paper 1.0
Author-Name: Du Caicai 
Author-Name: Muysken Joan  
Author-Name: Sleijpen Olaf 
Author-workplace-name: METEOR
Title: Lessons from the financial crisis: Funded pension funds should invest conservatively
Abstract: We model a three-pillar pension system and analyse in this context the impact of the financial crisis on the aggregate economy, using an overlapping generations model where individuals live for two periods. The system consists of (1) a PAYG pension system, (2) a Defined Benefit pension fund, and (3) private savings. We show that in this pension system the impact of the financial crisis on the economy is mitigated in case the funded pension funds have invested in more risk averse assets and savings are invested in more risky assets. In order to illustrate the working of the model with respect to the impact of the financial crisis, both in terms of size and development over time, we provide simulation results for the Netherlands. We argue that the lesson from the financial crisis is that pension funds should always invest in relatively risk-free assets, while private savings can be invested in more risky assets.
Keywords: macroeconomics ; 
Series: Research Memoranda
Creation-Date: 2011
Number: 020
File-URL: http://arnop.unimaas.nl/show.cgi?fid=21443
File-Format: application/pdf
File-Size: 464785
Handle: RePEc:unm:umamet:2011020