Macroeconomic Effects and Policy Challenges of Population Aging

April 1, 2006

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Hamid Faruqee, and Natalia T. Tamirisa Macroeconomic Effects and Policy Challenges of Population Aging, (USA: International Monetary Fund, 2006) accessed November 21, 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

This paper simulates the macroeconomic effects of population aging in a dynamic overlapping generations model of a small open economy. The model is calibrated to data for the Czech Republic, where population aging is proceeding at a pace comparable to that in other advanced countries in Europe. Simulations show that population aging is likely to slow economic growth and improvements in living standards. Although reforms to raise labor force participation and productivity growth can mitigate these adverse effects, they are unlikely to eliminate the need for fiscal reforms. The budget will come under pressure from rising age-related expenditures, and consolidation will be needed to preserve debt sustainability.

Subject: Aging, Fiscal consolidation, Labor force participation, Labor supply, Population and demographics

Keywords: Expenditure, Fertility rate, GDP, Labor force, Rate, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/095
Stock No:

WPIEA2006095
ISBN:

9781451863550
ISSN:

1018-5941

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