THE EFFECTS OF INFLATION AND INFLATION EXPECTATIONS ON PRIVATE PENSION FUND OPERATIONS
DOI:
https://doi.org/10.64734/bjss.1-1-02Keywords:
Inflation, expectations, private pension systemAbstract
This study examines the extent to which private pension funds are influenced by inflation and inflation expectations within the framework of inflation and money illusion, and evaluates how investment decisions made within the Turkish Private Pension System (PPS) are shaped under these dynamics. The central question of the study is whether private pension funds, which are designed as long-term saving instruments, are guided by short-term perceptions and expectations in periods of high and volatile inflation. In this context, the study addresses the effects of the divergence between nominal returns and real welfare gains on investment behavior from the perspective of money illusion.
The analysis is conducted using monthly data on inflation, inflation expectations, and private pension fund transactions covering the period from January 2022 to November 2025. Given that the relationship between inflation expectations and realized inflation varies over time during the period under review, the analysis is carried out across two subperiods: the 2022–2023 period, during which expectations diverged markedly from realized inflation, and the post-2024 period, in which expectations and realizations followed a relatively parallel path. As a methodological approach, correlation analysis is employed to identify the direction and strength of the relationships among variables, while fund purchase and sale behaviors are evaluated based on monthly growth rates.
The findings indicate that fund purchase behavior in the private pension system exhibits a stronger association with inflation expectations than with realized inflation. These results demonstrate that money illusion constitutes an important behavioral mechanism shaping investment decisions in private pension systems.
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Copyright (c) 2025 Prof. Dr. Elçin AYKAÇ ALP- Dr. Ahmet Cihat ERDOĞAN (Author)
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