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Challenges Posed by Ageing to Financial and Monetary Stability*

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  • E Philip Davis

    ()
    (Department of Economics and Finance, Brunel University, Uxbridge, Middlesex, UB3 4PH, U.K.)

Abstract

In common with other OECD countries and some emerging market economies (EMEs), pension reform is essential for the future stability of the EU in general and EMU countries in particular. Its progress is of major concern to central banks as well as Ministries of Finance. We have highlighted a number of risks to financial stability that may occur due to ageing itself (with pension reform) and notably when there is a continued reliance on unsustainable pay-as-you-go pension systems. There are also challenges for counter-inflation monetary policy during the ageing process, as at different points it may generate deflationary and inflationary pressures, while a fiscal crisis would have major repercussions for monetary stability. The transmission process of monetary policy will also enter a state of flux with ageing, although arguably this may be sufficiently gradual to allow policymakers time to adapt. On the other hand, we detect a negative effect of ageing on productivity, which if substantiated offers a deeper challenge both to stability and living standards as ageing progresses. The Geneva Papers (2005) 30, 542–564. doi:10.1057/palgrave.gpp.2510048

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

Volume (Year): 30 (2005)
Issue (Month): 4 (October)
Pages: 542-564

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Handle: RePEc:pal:gpprii:v:30:y:2005:i:4:p:542-564

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References

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  1. Martin Feldstein, 1995. "Social Security and Saving: New Time Series Evidence," NBER Working Papers 5054, National Bureau of Economic Research, Inc.
  2. Willi Leibfritz & Deborah Roseveare & Douglas Fore & Eckhard Wurzel, 1995. "Ageing Populations, Pension Systems and Government Budgets: How Do They Affect Saving?," OECD Economics Department Working Papers 156, OECD Publishing.
  3. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
  4. Peter Fortune, 1998. "Mutual funds, part II: fund flows and security returns," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  5. Deborah Roseveare & Willi Leibfritz & Douglas Fore & Eckhard Wurzel, 1996. "Ageing Populations, Pension Systems and Government Budgets: Simulations for 20 OECD Countries," OECD Economics Department Working Papers 168, OECD Publishing.
  6. Sylvester J. Schieber & John B. Shoven, 1994. "The Consequences of Population Aging on Private Pension Fund Saving and Asset Markets," NBER Working Papers 4665, National Bureau of Economic Research, Inc.
  7. Froot, Kenneth A & Scharftstein, David S & Stein, Jeremy C, 1992. " Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," Journal of Finance, American Finance Association, vol. 47(4), pages 1461-84, September.
  8. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
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  10. Guttentag, Jack & Herring, Richard, 1984. " Credit Rationing and Financial Disorder," Journal of Finance, American Finance Association, vol. 39(5), pages 1359-82, December.
  11. James M. Poterba, 1998. "Population Age Structure and Asset Returns: An Empirical Investigation," NBER Working Papers 6774, National Bureau of Economic Research, Inc.
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Cited by:
  1. Henkens, C.J.I.M. & Dalen, H.P. van, 2011. "The employer’s perspective on retirement," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4807650, Tilburg University.
  2. Dalen, H.P. van & Henkens, C.J.I.M. & Schippers, J., 2009. "Unraveling the age-productivity nexus: Confronting perceptions of employers and employees," Discussion Paper 2009-4, Tilburg University, Center for Economic Research.

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