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Reprint of: Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives

Boubaker, Sabri; Gounopoulos, Dimitrios; Nguyen, Duc Khuong; Paltalidis, Nikos

Reprint of: Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives Thumbnail


Authors

Sabri Boubaker

Dimitrios Gounopoulos

Duc Khuong Nguyen



Abstract

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.

Citation

Boubaker, S., Gounopoulos, D., Nguyen, D. K., & Paltalidis, N. (2018). Reprint of: Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives. Journal of Banking and Finance, 92, 340-357. https://doi.org/10.1016/j.jbankfin.2018.03.003

Journal Article Type Article
Acceptance Date Dec 13, 2016
Online Publication Date Mar 17, 2018
Publication Date Jul 1, 2018
Deposit Date Jul 13, 2018
Publicly Available Date Sep 17, 2019
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 92
Pages 340-357
DOI https://doi.org/10.1016/j.jbankfin.2018.03.003
Public URL https://durham-repository.worktribe.com/output/1354164

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