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Christoph Freudenberg and Mr. Frederik G Toscani
Past reforms have put the Peruvian pension system on a largely fiscally sustainable path, but the system faces important challenges in providing adequate pension levels for a large share of the population. Using administrative microdata at the affiliate level, we project replacement rates in the defined benefit (DB) and defined contribution (DC) pillars over the next 30 years and simulate the impact of various reform scenarios on the average level and distribution of pensions. In the DB pillar, the regressive minimum contribution period should be re-thought, while in the DC pillar a broadening of the contribution base and/or an increase in contribution rates would help increase replacement rates relative to the baseline forecast of 25-33 percent. A higher net real rate of return than assumed in the baseline would also have a significant positive impact. In the medium-term, labor market reform to tackle informality, and a broad pension reform to restructure the system and avoid competition between the DB and DC pillars should be a priority. Given low pension coverage, having a strong non-contributory pillar will remain important for the foreseeable future.
International Monetary Fund. African Dept.
This paper discusses Guinea’s 2016–20 National Economic and Social Development Plan (PNDES). The PNDES represents the second generation of planning under the Third Republic, after the 2011–15 Five-Year Plan. Through the 2016–20 PNDES, the authorities intend to address the various development challenges posed by the socioeconomic and environmental situation while ensuring post-Ebola public health surveillance and alignment with international development agendas. The principal beneficiaries of the PNDES are the Guinean populations, but particularly poor and vulnerable groups, the government itself, the private sector, and the regions, including urban and rural areas.
Sophia Chen
I study whether firms' reliance on intangible assets is an important determinant of financing constraints. I construct new measures of firm-level physical and intangible assets using accounting information on U.S. public firms. I find that firms with a higher share of intangible assets in total assets start smaller, grow faster, and have higher Tobin’s q. Asset tangibility predicts firm dynamics and Tobin’s q up to 30 years but has diminishing predicative power. I develop a model of endogenous financial constraints in which firm size and value are limited by the enforceability of financial contracts. Asset tangibility matters because physical and intangible assets differ in their residual value when the contract is repudiated. This mechanism is qualitatively important to explain stylized facts of firm dynamics and Tobin’s q.
Mr. John Kiff, Michael Kisser, Mauricio Soto, and Mr. S. E Oppers
This paper provides the first empirical assessment of the impact of life expectancy assumptions on the liabilities of private U.S. defined benefit (DB) pension plans. Using detailed actuarial and financial information provided by the U.S. Department of Labor, we construct a longevity variable for each pension plan and then measure the impact of varying life expectancy assumptions across plans and over time on pension plan liabilities. The results indicate that each additional year of life expectancy increases pension liabilities by about 3 to 4 percent. This effect is not only statistically highly significant but also economically: each year of additional life expectancy would increase private U.S. DB pension plan liabilities by as much as $84 billion.
Mariusz A. Sumlinski
Concentrated distribution of international reserves is puzzling. I show that the growth rates of international reserves bear only a very weak relationship to their initial stocks (scaled by GDP or in absolute terms), and that, by implication, the cross-sectional distribution of reserves conforms to Zipf's law. The law states that the size of reserves is inversely related to their ranking. Evidence in favor of the law is strong and time robust. I compare the crosssection distribution of international reserves embedded in the WEO projections to that implied by Zipf's law and find that international reserves are much less concentrated in the WEO projections than implied by Zipf's law.
International Monetary Fund
This paper presents a technical note on Mexico’s Financial Sector Assessment Program update. The Mexican experience displays interesting characteristics that provide lessons for other countries that still need to design the decumulation phase of their newly established second pillars. The rationale for the choice of specialized annuity providers has been, on the one hand, to avoid the contagion effect from composite life and nonlife insurance companies operating annuities, and on the other hand, the implicit government guarantee associated with a benefit provision for which participation has been mandated by the federal government.
Mr. Alain Jousten
The present paper reviews key issues in pension design and pension reform encountered all across the world. The paper heavily refers to the recent U.S. Social Security reform debate in general and to the Personal Retirement Accounts proposal in particular. A particular emphasis is put on annuitization and risk-taking in the economy. Our discussion signals some inadequacy of the proposed measures with respect to the goals of viability of the system and individual financial security during retirement.
International Monetary Fund. External Relations Dept.

'Africa: Making Its Move' explores some of the obstacles facing sub-Saharan Africa as it attempts to capitalize on changes that offer fresh opportunities for growth and poverty reduction. The lead article describes the changes and suggests how Africa can build on them to progress further. Other articles focus on the aid situation, financial sector development, trade, the business environment, and political and policy reform on the continent. 'Country Focus' examines the Central African Economic and Monetary Community, and two guest contributors look at how the international community can help the most fragile states and how oil-producing countries can manage windfall revenues. 'People in Economics' profiles the European Central Bank's first chief economist, Otmar Issing; 'Picture This' examines the global housing slowdown; and 'Back to Basics,' explains current account deficits. Another article discusses the realities of health financing.

Mr. Aleksandar Zaklan, Mr. Paolo Mauro, Martín Minnoni, and Mr. Andre Faria
We trace the history of where and why investors from the most advanced countries directed funds, ultimately helping finance economic development in emerging market countries. To do this, we analyze the determinants of international investors' willingness to hold the external liabilities issued by emerging market countries, through cross-country regressions for both prices (bond spreads) and quantities (bond market capitalization or stocks of external liabilities) estimated at various points during two waves of financial globalization (1870-1913 and the present time). The data are drawn from primary sources for the historical period, and the much-expanded, new vintage of the Lane and Milesi-Ferretti (2006) data set for the modern period. The results suggest that, throughout the past one and a half centuries, a combination of human capital (including informal human capital) and institutional quality has been a key determinant of emerging market countries' ability to attract international investors.