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A young EU member’s ageing: budgetary and macroeconomic consequences of Slovenia’s demographic prospects

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  • Klaus Weyerstrass
  • Reinhard Neck

Abstract

In this paper, we simulate a macroeconometric model of Slovenia over the period 2012–2060, using the projected demographic development as input, and determine time paths for budgetary and macroeconomic variables under alternative assumptions about Slovenian policy instruments so as to limit budgetary pressures stemming from population ageing. The main macroeconomic indicators (growth, employment, price stability, sustainable public finances) are shown to depend on the assumed long-run policy options followed. It is demonstrated that the ageing of the Slovenian population projected in the demographic forecast leads to severe budgetary problems unless increases of the retirement age, rising social security contributions or reductions of state financed pensions are implemented. A reduction of the pension replacement rate turns out to be the most effective measure to cope with the budgetary implications of population ageing. However, none of the analysed policy measures is sufficient to stabilise the debt ratio. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Klaus Weyerstrass & Reinhard Neck, 2013. "A young EU member’s ageing: budgetary and macroeconomic consequences of Slovenia’s demographic prospects," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(3), pages 427-456, August.
    • Handle: RePEc:kap:empiri:v:40:y:2013:i:3:p:427-456
    DOI: 10.1007/s10663-013-9217-z
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    References listed on IDEAS

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    1. Balassone, F. & Cunha, J. & Langenus, G. & Manzke, B. & Pavot, J. & Prammer, D. & Tommasino, P., 2008. "Fiscal sustainability and policy implications for the euro area," Working papers 225, Banque de France.
    2. Auerbach,Alan J. & Lee,Ronald D. (ed.), 2001. "Demographic Change and Fiscal Policy," Cambridge Books, Cambridge University Press, number 9780521662444.
    3. Fabrizio Balassone & Jorge Cunha & Geert Langenus & Bernhard Manzke & Jeanne Pavot & Doris Prammer & Pietro Tommasino, 2011. "Fiscal sustainability and policy implications: a post-crisis analysis for the euro area," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 3(2), pages 210-234.
    4. Reinhard Neck & Dmitri Blueschke & Klaus Weyerstrass, 2011. "Optimal macroeconomic policies in a financial and economic crisis: a case study for Slovenia," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 435-459, July.
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    Cited by:

    1. Reinhard Neck & Dmitri Blueschke & Klaus Weyerstrass, 2013. "Trade-Off of Fiscal Austerity in the European Debt Crisis in Slovenia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(4), pages 367-380, November.

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    More about this item

    Keywords

    Macroeconomics; Fiscal policy; Ageing; Slovenia; Pension economics; Public debt; E17; E37; H63;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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