Pension Reform and the Fiscal Policy Stance

Philip Gerson, George Mackenzie, Peter Heller and Alfredo Cuevas

No 2001/214, IMF Working Papers from International Monetary Fund

Abstract: The increased budget deficit caused by the privatization of a public pension plan does not imply a relaxation of the stance of fiscal policy. The reform's impact on the fiscal stance and national saving depends primarily on its effect on the sum of explicit and implicit public debt and on the post-reform payroll tax and private system contribution rates. However, the precise impact of reform also depends on such influences as the relationship between the rates of interest on implicit and explicit public debt. There may be circumstances in which pension privatization, if not offset by fiscal consolidation, will loosen the fiscal stance.

Keywords: WP; deficit; interest rate; debt; rate of return; rate; social security; old age pension; pension reform; fiscal balance; debt default risk; savings behavior; cash-flow deficit; saving rate; explicit debt; deficit target; increase saving; pension fund saving; contribution rate; implicit debt; Pension spending; Pensions; Private savings (search for similar items in EconPapers)
Pages: 16
Date: 2001-12-01
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Citations: View citations in EconPapers (4)

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