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Macroeconomic Effects and Policy Challenges of Population Aging
Author:
Mr. Hamid Faruqee
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and
Ms. Natalia T. Tamirisa
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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 095
Language:
English
Publication Date:
01 Apr 2006
DOI:
https://doi.org/10.5089/9781451863550.001
ISBN:
9781451863550
ISSN:
1018-5941
Pages:
23
Keywords:
WP; GDP; expenditure; fertility rate; labor force; rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund