Benes, J., K. Clinton, R. Garcia-Saltos, M. Johnson, D. Laxton, P. Manchev and T. Matheson, 2010, “Estimating Potential Output with a Multivariate Filter,” IMF Working Paper 10/285 (Washington: International Monetary Fund).
Berger, H., T. Dowling, S. Lanau, W. Lian, M. Mrkaic, M. T. Sanjani, and P. Rabanal, forthcoming, “Steady As She Goes—Estimating Potential during Financial ‘Booms and Busts,’” IMF Working Paper (Washington: International Monetary Fund).
Blagarve, P., R. Garcia Saltos, D. Laxton, and F. Zhang, 2015, “A Simple Multivariate Filter for Estimating Potential Output,” IMF Working Paper, 17/79 (Washington: International Monetary Fund).
Budina, N., Huidan Lin, Esther Pérez Ruiz, Jérôme Vandenbussche, and Anke Weber, 2015, “Potential Output in France, Germany, and Spain: A Re-Assessment”, Chapter 3 of Spain 2015, Selected Issues Paper No. [15/233], International Monetary Fund, 2015.
Central Bank of Malta, 2015, “Assessing the Supply Side of the Maltese Economy using a Production Function Approach”, Report published in the Quarterly Review 2013:4.
Grech, Aaron G. (2015), “Understanding the Macroeconomic Impact of Migration in Malta”, Working Paper, Central Bank of Malta, http://www.centralbankmalta.org/file.aspx?f=11222
Jaimovich, Nir, and Henry E. Siu. “The Trend is the Cycle: Job Polarization and Jobless Recoveries”. No. w18334. National Bureau of Economic Research, 2012.
Micallef (2015), “Estimating the Impact of Structural Reforms to Increase the Female Participation Rate on Potential Output”, Policy Note, Central Bank of Malta.
Prepared by N. Budina and F. Grinberg. We thank participants at the seminar during the mission in Malta for useful comments and suggestions.
For more information see Blagrave and others, 2015 and Chapter 2 of the 2015 World Economic Outlook.
If wide swings in output tend to occur alongside wide swings in credit, an MVF filter with financial variables (MVF_FV) maybe more appropriate to use (Berger et al, 2015). In these cases, the filter will ignore wide credit swings when determining the level of potential output.
The NAWRU is calculated using a Kalman filter, based on a dynamic system of labor supply and demand equations, up to the second year of the forecasting horizon. Thereafter, the NAWRU is determined by a mechanical rule (it takes the value of the second year plus half of the annual change in the second year).
For empirical estimates and a discussion of the importance of informational asymmetries in constraining firms’ investment performance in the Euro Area see Chapter 2 of Italy, 2015 Selected Issue Paper and Chapter 2 of Spain, 2015 Selected Issue Paper.
To the extent that our estimates do not account for the changes in the quality of human capital, the increase in measured tfp growth, in particularly during the last four years, could in part be explained by the sharp increase in highly skilled foreign workers from the EU.
Projections use population growth and labor force participation rates for ages 15 till 64, based on the EC Aging Report, but adjusted with the additional migrant flows observed in the last four years and adding the impact of additional labor market reforms on female labor force participation. See the 2015 Aging Group report, European Commission, Working group on Aging Populations and Sustainability.
This scenario is consistent with the CBM’s estimate of the impact of labor market reforms on potential growth over 2008–2014.
Prepared by Christian Ebeke and Jubum Na (all EUR). We are indebted to Mauricio Soto (FAD) for insightful comments and practical suggestions on an earlier draft. We also thank participants at the seminar at the Ministry for Finance in Malta for useful comments and suggestions.
This partially reflects the declining contribution rate over time, as the maximum income on which contributions are paid is growing by much less than the average wage growth.
Actions were already taken by the authorities to address risks to the sustainability of the pension system. These include the measure to gradually increase the retirement age currently standing at 62 years to 65 years by 2027.
More details on the Pension Strategy Group proposals can be found at: http://mfss.gov.mt/en/public-consultations/pensions/Documents/Pensions%20Report.pdf
The budget 2016 is already raising the contributory period from 40 to 41 years for persons born after 1968.
The Pensions Strategy Group is proposing to calculate the pensionable income on the best 3 years in last 15 years only with regards to those born 1952 to 1961 (who are currently on best 3 years in last 11, 12 or 13 years for employed persons and best 10 years in last 11,12 or 13 years for self-employed persons). As already legislated, those born from 1962 onwards would have their pensionable income calculated on best 10 years in 40 years for both employed and self-employed persons.
Increases in contribution rates are very often unpopular, prompting most countries to rule out increases in contribution rates explicitly or implicitly. However, some countries do have mechanisms in place to increase contribution (e.g. Canada, Germany, and Japan). There may be adverse economic effects coming from lowering incentives to work.
In Australia there has been an abolition of age limit (70 years) on compulsory contributions to private pension schemes in 2013.
At present in Malta, for a significant number of pensioners, pension benefits are aligned to an annual assessment of existing collective agreements whilst the pension income of all other pensioners is increased by the COLA. The PSG is of the view that this is socially unjust, as it provides no protection to workers who are not covered by the collective agreement.
The Pension Expenditure Template developed by Expenditure Policy staff, Fiscal Affairs Department, at the International Monetary Fund has been used. This version includes the latest Aging Report baseline projections.
The template is suitable for mature systems in terms of coverage and benefits and is more appropriate for long-term- than short-term projections.
It is worth nothing that the baseline scenario includes the expected gradual increase in the retirement age to 65 years by 2027, and then remains unchanged thereafter.
This scenario assumes that the retirement age for both men and women is increasing by a given level over an extended period from 2030 to 2040.
The labor market participation rate (of people aged 20–64) in Malta (69.0 percent) was below the EU-28 average in 2013 (76.5 percent), but it is projected to equal the EU-28 average in 2053 (79.9 percent). The participation rate of older workers (aged 55–64) in 2013 was lower (38.7 percent) than the EU-28 average (54.4 percent). Over the period 2013 to 2053, the participation rate of older workers is projected to increase by 26.4 p.p. to 65.0 percent in 2053. The percentage increase is higher than in the EU-28 (15.3 p.p.: from 54.4 percent in 2013 to 69.7 percent in 2053). According to the 2015 Ageing Report, employment rate (of people aged 20-64) is projected to increase from 65.0 percent in 2013 (EU-28: 68.4 percent) to 75.1 percent in 2053 (EU-28: 74.9 percent). Employment rate of older people (aged 55–64) is projected to change from 36.5 percent in 2013 to 61.0 percent in 2053 (EU-28: from 50.3 percent to 66.6 percent).
Under this scenario, the old age dependency ratio is lowered by 2 percentage points per year compared to the 2015 Aging Report’s baseline.