Can Shift to a Funded Pension System Affect - ASERS

Theoretical and Practical Research in Economic Fields
Once established that a long run cointegration exists, Equation (3) is estimated. A maximum lag order of one
is allowed in the ARDL model using the Schwarz Bayesian Criteria since it presents the smaller residual sum of
squared. The following ARDL (4,3,2,3) specification is used.
Table 5 reports the results of the ARDL where the regressions fit reasonably well and pass the main
diagnostic tests. All levels estimates are highly significant and have also the expected signs. The results suggest that
there is a strong evidence between what the theory predict (about the relationship between savings and pension
funds) and the estimated variables. The constant term is positive and highly significant at 0.01 level.
The estimated retirement savings variables (RPENS, RPAYG and RINS) show the coefficients with correct
signs and are statistically significance at 0.01 and 0.05. The variable DR is with the right signs and statistically
significant at 0.01 level.
Section 1, Short-run coefficient estimates
Table 5. ARDL (4,3,2,3) Equation (3)
Lag order 1 2 3 4
ΔSAV 0.6874** 0.3213** -0.1703*
( 8.971) ( 3.466 ) ( -1.972)
ΔRINS 7.9250**
(4.0295)
ΔRPENS
0.25532 ♦
(1.6884)
ΔRPAYG 9.9141**
( 4.0232)
ecm
-0.028164 ♦
(-1.8313)
Section 2, Long-run coefficient estimates
C RINS RPAYG RPENS DR
1.679842** 0.62959* -0.93436* 0.09025* -0.128499**
(3.156399) (2.352) (-2.3852) (1.689) (-4.0493)
Dummy4 -0.04248*
(-2.2338)
Section 3 Diagnostics
Adjusted R-squared: 0.84591; Durbin-Watson stat: 1.8272;
Serial Correlation 2 SC(2) 1.412[0.235] ;
Functional Form 2 FF
(1) 0.52528[0.469] ;
Normality 2 N
(2) 6.847[0.6321] ;
Heteroscedasticity 2 H
(1) 0.33334[0.564] .
♦significant at the 0.10 level; *significant at the 0.05 level; **significant at the 0.01 level ; Obs. 152 ( monthly)
The results of Equation(3) for the short run estimations show the complex dynamics that seem to exist
between changes in saving and changes in the pension funds. The coefficients are all significant. Among them,
ΔRPENS is the only one statistically significant at 0.10 level.
The equilibrium correction coefficient (ecm), estimated (-0.028) is statistically significant at 0.10 per cent and
has the correct sign, implying that a deviation from the long-run equilibrium, following a short run shock, is corrected
by about 2.8 per cent after one month. Finally, Table 5 (Section 2) shows the results of the dummy4 used 17 . It is
statistically significant at 0.01 level and the coefficients‟ value is -0.0242.
Overall, our results are consistent with the ones by Granville and Mallick (2004) that found evidence
suggesting that increases in mandatory pension funds financial assets increase national saving.
As regards the relation between dependency ratio and changes in national saving, it should be noted that
population ageing will itself generate changes in saving which may have a major macroeconomic impact.
According to the life cycle theory, savings rates tend to decline in countries where there are larger numbers of
17 We made estimations including all the dummies selected in 4.2.2. and dropped those not significant.
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