TY - JOUR
T1 - Reprint of Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives
AU - Boubaker, Sabri
AU - Gounopoulos, Dimitrios
AU - Nguyen, Duc Khuong
AU - Paltalidis, Nikos
PY - 2018/7/1
Y1 - 2018/7/1
N2 - This study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the United States. Using two structural vector autoregressive (VAR) models and a counterfactual scenario analysis, the results show that monetary policy shocks, as identified by changes in Treasury yields following changes in the central bank's target interest rates, lead to a substantial increase in pension funds’ allocation to equity assets. Notably, the shift from bonds to equity securities is greater during the period where the US Federal Reserve launched unconventional monetary policy measures. Additional findings show a positive correlation between pension fund risk-taking, low interest rates and the decline in Treasury yields across both well-funded and underfunded public pension plans, which is thus consistent with a structural risk-shifting incentive.
AB - This study quantifies the effects of persistently low interest rates near to the zero lower bound and unconventional monetary policy on pension fund risk incentives in the United States. Using two structural vector autoregressive (VAR) models and a counterfactual scenario analysis, the results show that monetary policy shocks, as identified by changes in Treasury yields following changes in the central bank's target interest rates, lead to a substantial increase in pension funds’ allocation to equity assets. Notably, the shift from bonds to equity securities is greater during the period where the US Federal Reserve launched unconventional monetary policy measures. Additional findings show a positive correlation between pension fund risk-taking, low interest rates and the decline in Treasury yields across both well-funded and underfunded public pension plans, which is thus consistent with a structural risk-shifting incentive.
UR - http://www.scopus.com/inward/record.url?scp=85046144600&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2018.03.003
DO - 10.1016/j.jbankfin.2018.03.003
M3 - Article
VL - 92
SP - 340
EP - 357
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -