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The Role of Pension Funds on Capital Market Growth in the New EU Member States

Author

Listed:
  • Gazmore Rexhepi
  • Burim Gashi
Abstract
The main goal of this paper is to analyse the impact of pension funds on capital market development in 11 new EU member states1 (NMS ) from Central and Eastern Europe, using annual data from 2010 to 2020. Stock market capitalization and private bond market capitalization are used as a proxy for capital market growth. The relationship between the variables is examined using the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) methods. The results indicate that pension funds have a positive effect on growth in stock and bond markets. These results raise a number of implications that call for a careful reconsideration of the management approach to pension funds and for a reassessment of their investment strategies. As pension funds accumulate sizable assets, they should switch their investment strategies towards more risk-oriented portfolios.

Suggested Citation

  • Gazmore Rexhepi & Burim Gashi, 2022. "The Role of Pension Funds on Capital Market Growth in the New EU Member States," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 4, pages 437-454.
    • Handle: RePEc:aoq:ekonom:y:2022:i:4:p:437-454
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    capital market development; pension funding; panel cointegration;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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