Pension funds, national savings and financial development: unpacking conditional effects using U.S. time series data

The relationship between pension funds and national savings (NS) varies depending on the existing level of savings within an economy. Similarly, the structural impacts of pension funds on financial development are influenced by these savings levels. This study examines both the direct effects of pension funds on NS and the interactive effects between savings and pension funds on NS and financial market development. Quarterly time series data from the USA, covering the period from the first quarter of 1960 to the third quarter of 2024, are utilized for the analysis. The dataset includes indicators such as total pension funds (TPF), private pension funds’ (PPF) investments, NS, personal savings (PS) and various measures of financial development. The autoregressive distributed lag (ARDL) approach is employed to capture both short-run dynamics and long-run relationships among these variables. The findings indicate that the effect of pension funds on NS is conditional upon the level of existing NS. When NS levels are high, the positive impact of pension funds on further boosting these savings is more pronounced. Furthermore, the interaction between NS and TPF demonstrates a positive and significant influence on financial development in both the short and long term.