Abstract The Korean National Pension Fund is projected to be depleted within thirty years. This paper examines whether short-term economic fluctuations affect fund projections and whether raising the target return can delay fund depletion. Using Vector Auto-Regression analysis, we find that contributions and returns are highly responsive to short-run fluctuations. However, business cycle volatility has a limited effect on fund forecasts. Our simulations suggest that increasing expected returns by taking on more risk can help delay depletion, even when accounting for increased volatility.
Kang et al. (Tue,) studied this question.