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...
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| Format: | Publications & Research |
| Language: | en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://hdl.handle.net/10986/21366 |
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okr-10986-213662021-04-23T14:04:01Z Contractual Savings or Stock Market Development—Which Leads? Catalan, Mario Impavido, Gregorio Musalem, Alberto R. adverse selection aggregate demand assets balance sheets bank deposits bank loans bank run bank runs banking regulation banking sector banking system bankruptcy banks bonds capital markets capitalization central bank contractual saving contractual saving institutions contractual savings contractual savings institutions corporate governance corporate pensions debt demand deposits depositors econometric evidence equity markets expected return financial \ assets financial assets financial crisis financial deepening financial innovation financial institutions financial intermediaries financial markets financial sector financial services financial structure funded schemes GDP government bonds gross domestic product growth rate imperfect substitutes insurance insurance companies interest rates life insurance life insurance companies liquid assets liquidity macroeconomic stability market value moral hazard mutual fund mutual funds non-life insurance pension fund portfolios pension funds pension schemes pensions portfolio portfolio diversification portfolios positive externalities present value public debt real interest rate retirement risk taking savings savings ratio secondary markets securities stock markets transaction costs transparency wealth contractual savings stock markets pension funds investments life insurance causality capital market growth tradable securities equity investments bond options industrialized societies developing countries statistical data financial development institutional economics market analysis insurance companies market value 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 runs only 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. 2015-01-30T15:18:32Z 2015-01-30T15:18:32Z 2000-08 http://hdl.handle.net/10986/21366 en_US Policy Research Working Paper;No. 2421 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Chile Malaysia Singapore South Africa Thailand |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
en_US |
| topic |
adverse selection aggregate demand assets balance sheets bank deposits bank loans bank run bank runs banking regulation banking sector banking system bankruptcy banks bonds capital markets capitalization central bank contractual saving contractual saving institutions contractual savings contractual savings institutions corporate governance corporate pensions debt demand deposits depositors econometric evidence equity markets expected return financial \ assets financial assets financial crisis financial deepening financial innovation financial institutions financial intermediaries financial markets financial sector financial services financial structure funded schemes GDP government bonds gross domestic product growth rate imperfect substitutes insurance insurance companies interest rates life insurance life insurance companies liquid assets liquidity macroeconomic stability market value moral hazard mutual fund mutual funds non-life insurance pension fund portfolios pension funds pension schemes pensions portfolio portfolio diversification portfolios positive externalities present value public debt real interest rate retirement risk taking savings savings ratio secondary markets securities stock markets transaction costs transparency wealth contractual savings stock markets pension funds investments life insurance causality capital market growth tradable securities equity investments bond options industrialized societies developing countries statistical data financial development institutional economics market analysis insurance companies market value |
| spellingShingle |
adverse selection aggregate demand assets balance sheets bank deposits bank loans bank run bank runs banking regulation banking sector banking system bankruptcy banks bonds capital markets capitalization central bank contractual saving contractual saving institutions contractual savings contractual savings institutions corporate governance corporate pensions debt demand deposits depositors econometric evidence equity markets expected return financial \ assets financial assets financial crisis financial deepening financial innovation financial institutions financial intermediaries financial markets financial sector financial services financial structure funded schemes GDP government bonds gross domestic product growth rate imperfect substitutes insurance insurance companies interest rates life insurance life insurance companies liquid assets liquidity macroeconomic stability market value moral hazard mutual fund mutual funds non-life insurance pension fund portfolios pension funds pension schemes pensions portfolio portfolio diversification portfolios positive externalities present value public debt real interest rate retirement risk taking savings savings ratio secondary markets securities stock markets transaction costs transparency wealth contractual savings stock markets pension funds investments life insurance causality capital market growth tradable securities equity investments bond options industrialized societies developing countries statistical data financial development institutional economics market analysis insurance companies market value Catalan, Mario Impavido, Gregorio Musalem, Alberto R. Contractual Savings or Stock Market Development—Which Leads? |
| geographic_facet |
Chile Malaysia Singapore South Africa Thailand |
| relation |
Policy Research Working Paper;No. 2421 |
| description |
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 runs only 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. |
| format |
Publications & Research |
| author |
Catalan, Mario Impavido, Gregorio Musalem, Alberto R. |
| author_facet |
Catalan, Mario Impavido, Gregorio Musalem, Alberto R. |
| author_sort |
Catalan, Mario |
| title |
Contractual Savings or Stock Market Development—Which Leads? |
| title_short |
Contractual Savings or Stock Market Development—Which Leads? |
| title_full |
Contractual Savings or Stock Market Development—Which Leads? |
| title_fullStr |
Contractual Savings or Stock Market Development—Which Leads? |
| title_full_unstemmed |
Contractual Savings or Stock Market Development—Which Leads? |
| title_sort |
contractual savings or stock market development—which leads? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://hdl.handle.net/10986/21366 |
| _version_ |
1764448051782483968 |