Why should the portfolios of mandatory private pension funds be captive? (the foreign investment question)
Should the portfolios of mandatory, private pension funds in developing countries be invested exclusively in the home country? Or should their managers be free to make prudent investments anywhere in the world? Traditional portfolio analysis gives a clear answer from the point of view of the beneficiaries of the funds: Lifting geographic restraints expands the risk-reward frontier, and unequivocally enhances their welfare. However, if the balance of payments is constrained, capital outflows must be offset by compensating inflows. We assume that, when pension funds purchase foreign securities, the State is constrained to borrow an equal amount on international markets. We then use a simple model to analyze the resulting trade-offs. Chile, Argentina, Poland and Kazakhstan provide concrete examples of some of the issues discussed.
Year of publication: |
2003
|
---|---|
Authors: | Menil, Georges de |
Institutions: | Département et Laboratoire d'Économie Théorique Appliquée (DELTA), École Normale Supérieure (ENS Paris) |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Money, Inflation and output in Romania, 1992-2000.
Budina, Nina,
-
Planning for the Optimal Mix of Paygo Tax and Funded Savings.
Menil, Georges de, (2004)
-
Reflections on the Great Recession of 2008-09
Menil, Georges de, (2010)
- More ...