EconPapers    
Economics at your fingertips  
 

Fiscal sustainability and policy rules under changing demographic forecasts

Jukka Lassila, Tarmo Valkonen and Juha M. Alho

No 1265, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: All practical evaluations of fiscal sustainability that include the effects of population ageing must utilize demographic forecasts. It is well known that such forecasts are uncertain, and that has been taken into account in some studies by using stochastic population projections jointly with economic models. We develop this approach further by introducing regular demographic forecast revisions that are embedded in stochastic population projections. This allows us to separate systematically, in each demographic outcome and under different policy rules, the expected and the actualized effects of population ageing on public finances. We show that the likelihood of sustainability risks is significant, and that it would be wise to consider policies that reduce the likelihood of getting highly indebted. Furthermore, although demographic forecasts are uncertain, they seem to contain enough information to be useful in forward-looking policy rules.

Keywords: public finance; fiscal sustainability; stochastic population simulations; changing demographic forecasts (search for similar items in EconPapers)
JEL-codes: H30 H62 H63 J11 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.etla.fi/wp-content/uploads/2012/09/dp1265.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rif:dpaper:1265

Ordering information: This working paper can be ordered from
https://www.etla.fi/en/publications/dp1265-en/

The price is 10€.

Access Statistics for this paper

More papers in Discussion Papers from The Research Institute of the Finnish Economy Contact information at EDIRC.
Bibliographic data for series maintained by Kaija Hyvönen-Rajecki ().

 
Page updated 2025-03-31
Handle: RePEc:rif:dpaper:1265