How to Assess Fiscal Implications of Demographic Shifts: A Granular Approach

David Amaglobeli and Wei Shi

No 2016/002, IMF Fiscal Affairs Department from International Monetary Fund

Abstract: Over the next few decades, the world will experience significant demographic shifts, with material fiscal implications. In many advanced and emerging market economies, aging populations will lead to higher spending on pensions and health care. Moreover, projected population dynamics will adversely affect growth and government revenues. Building on and extending a 2015 IMF Staff Discussion Note by Clements and others, this note presents a simple framework that can assist researchers in quantifying the effects of demographic changes resulting from population aging on government fiscal balances. It includes two country applications of the framework and an associated template. The note addresses several key questions: What are channels through which demographic changes could affect public finances? How can we quantify the fiscal impact of demographic changes? How can we tailor the assessment to country-specific circumstances?

Keywords: FADHTN; HTN; labor force; coverage ratio; age-gender cohort; medium-fertility scenario; status quo; expenditure elasticity; age structure; age-related expenditure; replacement rate; dependency ratio; demographics scenario GDP; age-related expenditure elasticity; consumption spending; low-fertility scenario; Aging; Demographic change; Labor force participation; Health care spending; Europe (search for similar items in EconPapers)
Pages: 24
Date: 2016-09-27
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Citations: View citations in EconPapers (7)

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