Macroeconomic Effects of Public Pension Reforms

By Joana Pereira, Philippe D Karam, Dirk V Muir, Anita Tuladhar

December 1, 2010

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Joana Pereira, Philippe D Karam, Dirk V Muir, and Anita Tuladhar. Macroeconomic Effects of Public Pension Reforms, (USA: International Monetary Fund, 2010) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper explores the macroeconomic effects of three public pension reforms, namely an increase in retirement age, a reduction in benefits and an increase in contribution rates. Using a five-region version of the IMF‘s Global Integrated Monetary and Fiscal model (GIMF), we find that public pension reforms can have a positive effect on growth in both the short run, propelled by rising consumption, and in the long run, due to lower government debt crowding in higher investment. We also find that a reform action undertaken cooperatively by all regions results in larger output effects, reflecting stronger capital accumulation due to higher world savings. An increase in the retirement age reform yields the strongest impact in the short run, due to the demand effects of higher labor income and in the long run because of supply effects.

Subject: Consumption, Expenditure, Financial services, Labor, Pension reform, Pension spending, Pensions, Public debt, Real interest rates

Keywords: Aging, Asia and Pacific, Consumption behavior, Consumption rise, Contribution rate, Demand decline, Fiscal Adjustment, GDP, GDP share, Global, Hike scenario, Increase consumption, OLG models, Pension reform, Pension Reforms, Pension spending, Pensions, Real GDP, Real GDP in the United States, Real GDP rise, Real interest rate, Real interest rates, Replacement rate, Sensitivity analysis, World real interest rate, WP

Publication Details

Pages:

63
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/297
Stock No:

WPIEA2010297
ISBN:

9781455211784
ISSN:

1018-5941

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