Pension Wealth and Macroeconomic Stability

Abstract

AbstractThis chapter reviews and updates the literature on the implications of accumulation of pension wealth for household finances, as well as for macroeconomic and financial stability, with a particular focus on evidence from Denmark. From an international perspective, increasing pension wealth is associated with higher debt levels. Microeconomic evidence also points to pension wealth being an important factor for explaining household wealth and debt positions. The maturing pension system in Denmark has given rise to concerns about the implications of larger household balance sheets for macroeconomic and financial stability. In general, Danish households are resilient and have access to substantial amounts of liquid wealth to buffer unexpected shocks to their disposable income. The balance sheet expansion may, however, have implications for macroeconomic stability since consumption among highly leveraged households tends to be more volatile than that of their less-leveraged peers.