Global Aging Pressures

Abstract

Demographic pressures will materialize in many economies over the next few decades. We examine the macroeconomic impact of alternative fiscal adjustment and structural reform strategies to address these global aging pressures using the IMF''s Global Fiscal Model (GFM). The results suggest substantial spillover effects of aging through international financial channels. To maintain sustainability, fiscal adjustment needs to be broad-based, while avoiding increases in direct taxes. There are substantial benefits from fiscal cooperation, while negative growth effects can be offset by complementary structural reforms in product and labor markets with the benefits accruing early and to all incomegroups.Economic models;Labor markets;Direct taxation;aging, fiscal adjustment, social security, government spending, fiscal variables, fiscal pressures, tax rates, fiscal affairs, dependency, fiscal affairs department, tax base, entitlement, fiscal positions, fiscal reform, taxation, fiscal policy, tax reform, fiscal consolidation, fiscal model, fiscal policies, budget constraint, fiscal deficits, fiscal sustainability, public finances, unemployment, primary deficit, government revenue, fiscal balance, primary expenditure, fiscal position, bargaining, tax policy, aging society, government expenditure, account deficits, government budget, fiscal contraction, tax system, expenditure ratios, expenditure cuts, fiscal scenario, fiscal incentives, public expenditure, government deficit, fiscal burden, fiscal response, progressive taxation, expansionary fiscal, fiscal structure, government budget constraint, ageing, public debt, unemployment benefits, structural fiscal, fiscal studies, budgetary position, aggregate demand, fiscal consolidations, fiscal models, fiscal implications, taxation of labor