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Enhancing Employee Pension Fund Performance for Sustainable Economic Growth in Indonesia

Author

Listed:
  • Susanti, Yuli

    (Monash University)

Abstract

In an era of unprecedented financial challenges, health emergencies, and technological disruptions, pension funds are critical to economic stability. Focused on the contexts of Indonesian employee pension funds, the study navigates the intricate dynamics of pension systems within the broader economy. Against an evolving global landscape marked by financial uncertainties and demographic shifts, the research scrutinizes how distinct pension schemes adopted by Indonesian employee pension funds shape the resilience and efficacy of their respective pension funds. The research employs two distinct yet complementary models to investigate the dynamic of pension fund outcomes amidst varying macroeconomic conditions and micro-level management practices. Firstly, a Vector Autoregression (VAR) model is utilized to explore the intricate interactions between macroeconomic variables. The VAR model allows for the simultaneous examination of multiple variables to understand the short and long-term effects on pension fund dynamics. Secondly, a micro-level panel data regression model is employed to delve deeper into specific factors influencing pension fund performance, including contribution rates, investment strategies, coverage, regulatory frameworks, and risk management practices. The analysis incorporates treatment variables related to the COVID-19 pandemic to examine the resilience of pension funds to external shocks. The empirical findings reveal significant associations between various macroeconomic factors, micro-level management practices, and pension fund performance outcomes. Notably, higher contribution rates, broader coverage, and effective risk management are found to positively impact pension fund performance, while certain aspects of the funding mechanism and regulatory framework exhibit negative associations. The study contributes to the existing literature by offering insights into the complex interplay between macroeconomic conditions, micro-level management practices, and pension fund outcomes, providing valuable implications for policymakers, practitioners, and stakeholders in the pension fund industry.

Suggested Citation

  • Susanti, Yuli, 2024. "Enhancing Employee Pension Fund Performance for Sustainable Economic Growth in Indonesia," Warwick-Monash Economics Student Papers 80, Warwick Monash Economics Student Papers.
    • Handle: RePEc:wrk:wrkesp:80
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/wmesp/manage/80_-_susanti.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Pension funds ; Economic stability ; Investment strategies ; Risk management ; Macroeconomic ; VAR model ; Indonesia pension funds JEL classifications: C33 ; E21 ; G22 ; G23 ; G53 ; H55 ; J32;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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