Global Aging Pressures: Impact of Fiscal Adjustment, Policy Cooperation, and Structural Reforms
IMF Working Papers, August 1, 2007
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- Global Aging Pressures: Impact of Fiscal Adjustment, Policy Cooperation, and Structural Reforms
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Bibliographic details
- Authors: Manmohan S. Kumar, Dennis P Botman
- Published: August 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867602.001
Summary
- Demographic pressures will materialize in many economies over the next few decades.
- The study examines the macroeconomic impact of alternative fiscal adjustment and structural reform strategies to address these global aging pressures using the IMF's Global Fiscal Model (GFM).
- Results suggest substantial spillover effects of aging through international financial channels.
- To maintain sustainability, fiscal adjustment needs to be broad-based, while avoiding increases in direct taxes.
- There are substantial benefits from fiscal cooperation.
- Negative growth effects can be offset by complementary structural reforms in product and labor markets, with the benefits accruing early and to all income groups.
Key Findings
- Substantial spillover effects of aging occur through international financial channels.
- Broad-based fiscal adjustment is required to maintain fiscal sustainability.
- Increasing direct taxes is not recommended as part of fiscal adjustment.
- Fiscal cooperation across countries yields substantial benefits.
- Complementary structural reforms in product and labor markets can offset negative growth effects of aging.
- The benefits from structural reforms accrue early and to all income groups.
Modeling and Scope
- Analytical tool: IMF's Global Fiscal Model (GFM).
- Subject areas: Aging, Consumption, Fiscal consolidation, Fiscal policy, Labor supply.
- Keywords highlighted by the study: euro area, government spending, product market, real GDP, real interest rate, WP.