Skip to main content

Research Repository

Advanced Search

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

Boubaker, S.; Gounopoulos, D.; Nguyen, D.K.; Paltalidis, N.

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


Authors

S. Boubaker

D. Gounopoulos

D.K. Nguyen



Abstract

This study quantifies the effects of persistently low interest rates near to the zero lower bound and the 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 conducted 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., & Paltalidis, N. (2017). Assessing the effects of unconventional monetary policy and low interest rates on pension fund risk incentives. Journal of Banking and Finance, 77, 35-52. https://doi.org/10.1016/j.jbankfin.2016.12.007

Journal Article Type Article
Acceptance Date Dec 13, 2016
Online Publication Date Dec 14, 2016
Publication Date Apr 1, 2017
Deposit Date Dec 19, 2016
Publicly Available Date Jun 14, 2018
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 77
Pages 35-52
DOI https://doi.org/10.1016/j.jbankfin.2016.12.007
Public URL https://durham-repository.worktribe.com/output/1367196

Files




You might also like



Downloadable Citations