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Contractual savings or stock market development: which leads?

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Catalan, M., Impavido, G., Musalem, A. Contractual savings or stock market development: which leads?. Journal of Contextual Economics – Schmollers Jahrbuch, 120(3), 445-487. https://doi.org/10.3790/schm.120.3.445
Catalan, Mario; Impavido, Gregorio and Musalem, Alberto R. "Contractual savings or stock market development: which leads?" Journal of Contextual Economics – Schmollers Jahrbuch 120.3, 2000, 445-487. https://doi.org/10.3790/schm.120.3.445
Catalan, Mario/Impavido, Gregorio/Musalem, Alberto R. (2000): Contractual savings or stock market development: which leads?, in: Journal of Contextual Economics – Schmollers Jahrbuch, vol. 120, iss. 3, 445-487, [online] https://doi.org/10.3790/schm.120.3.445

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Contractual savings or stock market development: which leads?

Catalan, Mario | Impavido, Gregorio | Musalem, Alberto R.

Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 120 (2000), Iss. 3 : pp. 445–487

6 Citations (CrossRef)

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Article Details

Catalan, Mario

Impavido, Gregorio

Musalem, Alberto R.

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Abstract

This paper studies the relationship between the development of contractual savings (assets of pension funds and life insurance companies) and capital markets. The focus is on the macroeconomic and financial effects of contractual savings' development. New theoretical ideas and empirical results are presented. At the theoretical level, we explain how the growth of the contractual savings sector promotes financial development and economic growth through different channels. We argue that among institutional investors, contractual savings institutions are the most effective at developing capital markets. What is different about contractual savings is that their liabilities are long-term and illiquid ones in asset holders' portfolios. At the empirical level, we analyze Granger causality between contractual savings and both market capitalization and value traded in stock markets for some OECD and other countries. The evidence suggests that the growth of contractual savings cause the development of capital markets.

Table of Contents

Section Title Page Action Price
Mario Catalan/Gregorio Impavido/Alberto R. Musalem: Contractual savings or stock market development:\rwhich leads? 445
Abstract 445
Zusammenfassung 445
1. Introduction 446
2. What is different about contractual savings? 448
2.1 Specialization in the financial sector, the term structure of interest rates, and growth 451
2.2 Development of the stock market and growth 453
2.3 Improved financial structure of governments, banks and firms, and reduced sovereign debt 453
2.4 Linkages between contractual savings and banking regulation 454
3. The role of contractual savings: some simple numerical examples 454
3.1 The structure of the economy and the role of the financial sector 454
3.2 Differential impact of contractual savings and mutual funds on capital markets development 457
3.3 Contractual savings institutions bias towards long-term assets and shares: A simple framework 458
4. Descriptive evidence 460
5. Econometric evidence on contractual savings and capital markets development: which leads? 468
5.1 Granger causality between contractual savings and market capitalization or value traded 471
5.2 Granger causality between pension funds and market capitalization or value traded 472
5.3 Granger causality between life insurance and market capitalization or value traded 473
5.4 Granger causality between non-life insurance and market capitalization or value traded 474
5.5 Summary of results 474
6. Summary, conclusions and recommendations 479
Appendix\r 482
References 486