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Macroeconomic Effects of Public Pension Reforms
Author: Ms. Joana Pereira, Mr. Philippe D Karam, Mr. Dirk V Muir, and Ms. Anita Tuladhar
Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 297
Language:
English
Publication Date:
01 Dec 2010
DOI:
https://doi.org/10.5089/9781455211784.001
ISBN:
9781455211784
ISSN:
1018-5941
Pages:
63
Keywords:
WP; real GDP; real interest rate; GDP; OLG models; Aging; Pension Reforms; Fiscal Adjustment; sensitivity analysis; contribution rate; demand decline; hike scenario; world real interest rate; replacement rate; GDP share; increase consumption; consumption behavior; real GDP in the United States; consumption rise; real GDP rise; Pension spending; Real interest rates; Pension reform; Pensions; Global; Asia and Pacific
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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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund