Public and private pension systems and macroeconomic volatility in OECD countries

This paper analyses the impact of public pension expenditures and pension funds' assets as well as its paid‐out benefits on macroeconomic volatility. We use panel data for 35 OECD countries for the period 1980–2018 and apply a set of state‐of‐the‐art econometric estimators. Our results suggest a smoothing effect of public pension expenditures on per capita consumption growth volatility and overall macroeconomic volatility. We however do not find such effects coming from pension funds' paid‐out benefits. In contrast, the effect of pension funds' assets depends crucially on the level of economic development: there is a dampening effect on per capita investment growth volatility in less developed countries; while a volatility‐boosting effect in most developed countries.