Pension Systems, Demographic Change, and the Stock Market

<P>Due to the accelerating demographic change of the population the reform of the existing pension systems constitutes one of the greatest political challenges in most European countries. </P><P>A theoretical discussion of different pension reforms must incorporate not only the demographic aspect but also the role of financial market risk and the impact on production and employment. </P><P>These notes develop a dynamic macroeconomic model which incorporates these aspects within a flexible theoretical framework. The proposed approach provides a large scale population model and features a sound description of the production side as well as of the financial side of the economy and their interactions with the pension system. </P><P>Within this framework various adjustment policies of the pension system are studied under different population scenarios. The consequences for the economy and the welfare of consumers are analyzed and compared.</P>