| Abstract: | The effect of inflation on asset accumulation in private pension funds is analyzed using a stock adjustment model which incorporates nonbehavioral saving. Nonbehavioral saving (such as capital gains) occurs with considerably lower adjustment cost than behavioral saving. The regressions using time series data suggest that inflation has a large negative effect on aggregate funded pension saving. This effect is apparently not due to a behavioral adjustment to changed relative rates of return, but is primarily due to capital losses. The effect is larger the higher the proportion of pension fund holdings in corporate equities. |
