Front Matter Page
© 2005 International Monetary Fund
August 2005
IMF Country Report No. 05/275
Czech Republic: Selected Issues
This Selected Issues paper for the Czech Republic was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on July 21, 2005. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the Czech Republic or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
CZECH REPUBLIC
Selected Issues
Prepared by J. Fernández-Ansola, Giovanni Ganelli, Natalia Tamirisa, and Anita Tuladhar (all EUR)
Approved by European Department
July 21, 2005
Contents
I. Introduction and Overview
II. Macroeconomic Effects of Population Aging in the Czech Republic
A. Introduction and Summary
B. Theory and Model
C. Calibration and Experiments
D. Simulations
E. Conclusions
References
Figures
1. Macroeconomic Effects of Population Aging
2. Delayed Fiscal Consolidation
3. No Consolidation Scenario
4. Labor Market Reforms and Labor-Augmenting Technological Change
III. Impact of Aging on Fiscal Sustainability
A. Introduction
B. Background
C. Fiscal Sustainability: Long-Run Projections
D. Concluding Remarks
References
Box
1. Long-Run Fiscal Projections: Underlying Data Assumptions
Figures
1. Fiscal Indicators
2. Pension System Indicators
3. Health Sector Indicators
4. Demographic and Labor Market Indicators
5. Long-Run Projections: Revenue and Expenditure, 2002–50
6. Long-Run Projections: Primary Balance and Net Debt, 2002-50
7. Age-Related Spending for 2008 and 2050
8. Alternative Scenarios: Health Care Spending, 2002–50
9. Alternative Scenarios: Pension Expenditure, 2002-50
10. Alternative Scenarios: Net Debt, 2002–50
11. Alternative Scenarios: Primary Balances, 2002–50
Tables
1. Intertemporal Fiscal Gap: An International Comparison
2. Indicators of the Fiscal Gap
3. Intertemporal Fiscal Gap and Generational Balance Gap: Alternative Policy Scenarios
Appendix
1. Note on the Generational Accounting Model
IV. Czech Republic: Household Balance Sheets in a Comparative Perspective
A. Introduction
B. The Balance Sheet Approach
C. Household Balance Sheet Trends in the Czech Transition
D. Structural Determinants and Likely Future Developments of Household Assets and Liabilities in the Czech Republic
E. Equilibrium Levels of Household Assets and Liabilities in the Czech Republic
F. Dealing with the Impact of Aging
G. Conclusions
References
Figures
1. Household Sector: Indicators of Financial Soundness, 1995–2002
2. Selected Countries: Household Bank Loans-to-GDP Ratios and Per-Capita GDP, 2003
3. Selected Countries: Household Financial Liabilities as Percent of Disposable Income and Per Capita GDP, 2002
4. Selected Countries: Household Financial Liabilities-to-Financial Assets Ratios and Per Capita GDP, 2002
5. Selected Countries: Household Financial Assets-to-Disposable Income and Old-Age Dependency Ratios, 2002
6. Selected Countries: Household Sector Total Assets Composition
Tables
1. Structural Model of Determinants of Household Financial Assets
2. Structural Model of Determinants of Household Liabilities
3. Czech Republic: Comparison of Actual and Predicted Variables, 2001
4. Czech Republic: Year-on-Year Rates of Growth of Household Financial Assets and Liabilities, 1996–2002
5. Selected Countries: Selected Expenditure Items of Average Household
6. Selected Countries: Household Balance Sheets: Volatility Measures
Appendix
I. Econometric Model Specification and Data Description
V. Monetary Policy Implications of Capital Account Volatility Under An Inflation Targeting Regime
A. Introduction and Summary
B. A Brief Description of the Model
C. Capital Account Shocks
D. Simulation Results
E. Conclusion
References
Figures
1. The Czech Republic: Simulated Effects of a Persistent FDI Shock
2. The Czech Republic: Simulated Effects of a Less Persistent FDI Shock
3. The Czech Republic: Simulated Effects of a Persistent Portfolio Investment Shock
4. The Czech Republic: Simulated Effects of a Less Persistent Portfolio Investment Shock
Table
1. Optimal Weights in the Monetary Policy Rule and Measures of Macroeconomic Variability