TY - JOUR
T1 - How to finance pensions
T2 - optimal strategies for pay-as-you-go pension systems
AU - Godínez-Olivares, Humberto
AU - Boado-Penas, María Del Carmen
AU - Pantelous, Athanasios A.
PY - 2016/1
Y1 - 2016/1
N2 - The aim of this paper was to design optimal strategies using nonlinear dynamic programming to guarantee the required level of liquidity in pay-as-you-go pension systems through changes in the key variables of the system, such as the contribution rate, retirement age and/or indexation of pensions. These strategies, also known as automatic balancing mechanisms (ABMs), calculate the optimal path of these variables over time, managing fluctuations in longevity, fertility rates, salary growth or any other kind of uncertainty faced by the pension scheme without repeated legislative intervention. A numerical application of our model, which uses the projection of the population structure of two representative countries, illustrates the main findings of the paper.
AB - The aim of this paper was to design optimal strategies using nonlinear dynamic programming to guarantee the required level of liquidity in pay-as-you-go pension systems through changes in the key variables of the system, such as the contribution rate, retirement age and/or indexation of pensions. These strategies, also known as automatic balancing mechanisms (ABMs), calculate the optimal path of these variables over time, managing fluctuations in longevity, fertility rates, salary growth or any other kind of uncertainty faced by the pension scheme without repeated legislative intervention. A numerical application of our model, which uses the projection of the population structure of two representative countries, illustrates the main findings of the paper.
KW - financial equilibrium
KW - optimization
KW - pay-as-you-go
KW - public pensions
KW - risk
UR - http://www.scopus.com/inward/record.url?scp=84955188056&partnerID=8YFLogxK
U2 - 10.1002/for.2351
DO - 10.1002/for.2351
M3 - Article
AN - SCOPUS:84955188056
VL - 35
SP - 13
EP - 33
JO - Journal of Forecasting
JF - Journal of Forecasting
SN - 0277-6693
IS - 1
ER -