The role of private pension system i̇n financial deepening: An Empirical application on Turkey

The inadequacy of the social security system during the retirement periods of individuals caused a search for a new social security system, and thus the individual retirement system emerged. The individual retirement system is complementary to the social security system in this respect. This system offers individuals the opportunity to provide additional income during their retirement periods by transferring the savings they have earned during their working period to individual retirement funds. In addition, individuals with higher standards can turn to investment with this income. Thus, financial deepening, which means the diversification and expansion of financial intermediaries and financial instruments, can be increased, and fund transfers can be provided between entrepreneurs who want to invest and the individual retirement system. This study investigates the role of the individual retirement system in financial deepening using quarterly data between 2006Q4-2024Q1 in Türkiye. For this purpose, M2 money supply was used as an indicator of financial deepening in the study and the fund amount of individual retirement participants as an indicator of individual retirement were used as variables, and these variables were analyzed using the ARDL bounds test approach and Granger Causality test, which are time series methods. As a result of the analysis, it was concluded that the increase in the amount of the individual retirement system funds increased financial deepening. With the government support and incentives, participation in the individual retirement system will increase, which will lead to an increase in funds. In this case, it will provide significant resources to the financial system and cause the system to develop. Thus, financial deepening will also increase. In summary, it has been concluded that the increase in the individual retirement system positively affects financial deepening. The Granger causality test results also support these results and it has been seen that the individual retirement system is the Granger causal factor of financial deepening.