The role of pension funds in capital market development in the new EU member states: An empirical panel cointegration approach

Abstract

Abstract The main goal of this paper is to analyse the impact of pension funds on capital market development in 11 new EU member states from Central and Eastern Europe using annual data for the period between 2000 and 2019. Given the geographical, institutional, political and economic differences across these countries, we split them into three homogenous groups: Balkan, Baltic and Visegrad countries. We use three different variables as a proxy for capital markets growth: stock market capitalization, the value of stock traded, and private bond market capitalization. We apply dynamic and fully-modified ordinary least squares to examine the relationship between the variables. The empirical results indicate that pension funds have a positive effect on the bond markets growth in all sub-groups but they do not impact the stock market growth in the Balkan and Baltic countries.